ASSET PURCHASE AGREEMENT
between
FAIRCHILD SEMICONDUCTOR CORPORATION
as Buyer
and
NATIONAL SEMICONDUCTOR CORPORATION
as Seller
dated
as of March 11, 1997
Table of Contents
Page
ARTICLE I DEFINITIONS................................................... 1
1.1. Defined Terms................................................. 1
1.2. Rule of Construction.......................................... 12
ARTICLE II SALE OF ASSETS.................................................. 12
2.1. Purchase and Sale............................................. 12
2.2. Excluded Assets............................................... 15
2.3. Assumed Liabilities; Excluded Liabilities..................... 16
2.4. The Closing................................................... 19
2.5. Purchase Price................................................ 19
2.6. Consent of Third Parties; Further Assurances.................. 21
2.7. Shared Contracts.............................................. 21
2.8. Apportionment at Closing Date; Customer Billing................ 22
2.9. Warranty Claims............................................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...................... 22
3.1. Organization and Authority.................................... 22
3.2. Authorization; Binding Obligation............................. 23
3.3. No Violations................................................. 23
3.4. Financial Statements.......................................... 24
3.5. Absence of Changes............................................ 24
3.6. Assets........................................................ 25
3.7. Personal Property............................................. 25
3.8. Permits, Licenses............................................. 25
3.9. Compliance with Laws and Litigation........................... 26
3.10. Employees..................................................... 27
3.11. Agreements.................................................... 27
3.12. Environmental Matters......................................... 28
3.13. No Undisclosed Liabilities.................................... 29
3.14. Warranty Claims............................................... 29
3.15. Inventory; Purchased Assets................................... 30
3.16. Real Estate................................................... 30
3.17. Ownership of Subsidiaries..................................... 33
3.18. Tax Matters................................................... 33
3.19. Employee Benefit Plans........................................ 34
3.20. No Implied Representation..................................... 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER......................... 37
4.1. Organization and Authority.................................... 37
4.2. Authorization; Binding Obligation............................. 37
4.3. No Violations................................................. 37
4.4. Inspections; Limitation of Seller's Warranties................ 38
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ARTICLE V CERTAIN COVENANTS................................................ 38
5.1. Information................................................... 38
5.2. Tax Reporting and Allocation of Consideration................. 39
5.3. Operating Agreements.......................................... 40
5.4. Tax Matters................................................... 40
5.5. Employee Matters.............................................. 42
5.6. Covenant Not to Compete; Nonsolicitation...................... 46
5.7. Material Consents............................................. 48
5.8. Notice to Customers........................................... 48
5.9. Confidentiality............................................... 48
5.10. Estoppel ertificates.......................................... 49
5.11. Title Policies................................................ 49
5.12. Survey........................................................ 49
5.13. Accounts Receivable and Related Claims........................ 50
ARTICLE VI CLOSING.......................................................... 50
6.1. Seller's Closing Deliveries................................... 50
6.2. Buyer's Closing Deliveries.................................... 51
ARTICLE VII INDEMNIFICATION................................................. 51
7.1. Indemnification By Seller..................................... 51
7.2. Indemnification by Buyer...................................... 51
7.3. General Indemnification Procedures............................ 51
ARTICLE VIII MISCELLANEOUS.................................................. 53
8.1. Nonsurvival of Representations................................ 53
8.2. Notices....................................................... 53
8.3. Expenses...................................................... 54
8.4. Entire Agreement.............................................. 54
8.5. Assignment; Binding Effect; Severability...................... 54
8.6. Governing Law................................................. 55
8.7. Execution in Counterparts..................................... 55
8.8. Public Announcement........................................... 55
8.9. No Third Party Beneficiaries.................................. 55
8.10. Headings...................................................... 56
8.11. Further Assurances............................................ 56
8.12. Amendment and Waiver.......................................... 56
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Schedules
Schedule 1-A Accounts Payable
Schedule 1-B Accrued Expenses
Schedule 1-D Certain Business Products
Schedule 1-E Environmental Liabilities
Schedule 1-F Seller's Knowledge
Schedule 2.1A Principal Premises
Schedule 2.1A-1 Permitted Encumbrances
Schedule 2.1A-2 Remote Locations
Schedule 2.1B Principal Equipment
Schedule 2.1C Motor Vehicles and Other Equipment
Schedule 2.1D Office Equipment
Schedule 2.1E Inventory
Schedule 2.1F Contracts
Schedule 2.1I Governmental Permits
Schedule 2.1O Other Purchased Assets
Schedule 2.2D Excluded Equipment
Schedule 2.2F Excluded Contracts
Schedule 2.2J Work in Process and Die Banks
Schedule 3.3 Violations; Consents
Schedule 3.4 Certain Financial Information
Schedule 3.5 Certain Changes
Schedule 3.6 Title to Assets
Schedule 3.7 Personal Property
Schedule 3.9 Compliance with Laws
Schedule 3.10 Business Employees; Labor Matters
Schedule 3.11 Agreements
Schedule 3.12 Environmental Matters
Schedule 3.13 Disclosed Liabilities
Schedule 3.14 Warranty Claims
Schedule 3.15 Inventory; Purchased Assets
Schedule 3.16 Real Property
Schedule 3.17 Fairchild Subsidiaries
Schedule 3.18 Tax Matters
Schedule 3.19A Benefit Plans
Schedule 3.19I Retiree Benefits
Schedule 3.19J Enhanced Benefits
Schedule 3.19K Foreign Plans
Schedule 3.19K(i) Non-Subsidiary Foreign Plans
Schedule 3.19M Noncompliance
Schedule 5.2 Statement of Allocation
Schedule 5.5A Employee Matters
Schedule 5.5D Buyer's Plans not Established as of Closing Date
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Schedule 5.6 Integrated Circuit Products
Exhibits
Exhibit 2.3A Assumption Agreement
Exhibit 2.5B Purchase Price Note
Exhibit 6.1 Bill of Sale
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of March
11, 1997 between NATIONAL SEMICONDUCTOR CORPORATION, a Delaware corporation
("Seller"), and FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation
("Buyer").
Background
A. Seller is, among other things, engaged through its Fairchild Division
in the manufacture and sale of the Business Products (as hereinafter defined)
and the furnishing of the Business Services.
B. In connection with a plan of recapitalization which the Board of
Directors of Seller deems advisable and in the best interest of Seller, the
Fairchild Division and the stockholders of Seller, Seller will transfer certain
assets and liabilities of the Fairchild Division to Buyer, Buyer will accept
such assets and assume such liabilities, and Seller will enter into certain
operating agreements with Buyer, on the terms and conditions set forth herein.
Seller and Buyer are simultaneously entering into a letter agreement regarding
certain actions relating to implementation of the transactions contemplated
hereby.
C. The transactions contemplated hereby are taken with the consent of
Sterling Holding Company LLC to facilitate the transactions contemplated by the
Recap Agreement (as hereinafter defined).
Terms
In consideration of the mutual representations, warranties, covenants and
agreements, and upon the terms and subject to the conditions, hereinafter set
forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For the purposes of this Agreement, the following
words and phrases shall have the following meanings:
"Accounting Principles" shall have the meaning set forth in Section
2.5(c).
"Accounts Payable" means all liabilities or obligations that would be
included in the net book value of accounts payable related to the Purchased
Assets that would be set forth
on a balance sheet of the Business as of the Closing Date prepared on a basis
consistent with the Accounting Principles, including those identified on
Schedule 1-A.
"Accounts Receivable" shall have the meaning set forth in Section
2.2(b).
"Accrued Expenses" means all liabilities or obligations in respect of
the Business set forth on Schedule 1-B.
"Affiliate" of a Person means any Person controlling, controlled by,
or under common control with, such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agreement" shall have the meaning set forth in the Introduction.
"Acquired Business" shall have the meaning set forth in Section
5.6(e).
"Asset Acquisition Statement" shall have the meaning set forth in
Section 5.2.
"Assumed Contracts" means the Contracts assumed by Buyer pursuant to
Section 2.3(a).
"Assumed Liabilities" shall have the meaning set forth in Section
2.3(a).
"Assumption Agreement" shall have the meaning set forth in Section
2.3(a).
"Beneficiary" means the person(s) or entity designated by an employee,
by operation of law or otherwise as the party entitled to compensation,
benefits, insurance coverage, payments, indemnification or any other goods or
services as a result of any liability, or claim under any Benefit Plan, Foreign
Plan or under any other employee benefit plan, program or policy.
"Benefit Plan" shall have the meaning set forth in Section 3.19.
"Best Efforts" is defined to require that the obligated party make a
diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require any significant
expenditure of funds or the incurrence of any significant liability on the part
of the obligated party, nor the incurrence of any expenditure or liability which
is unreasonable in light of the related objective, nor does it require that the
obligated party act in a manner which would otherwise be contrary to prudent
business judgment or normal commercial practices in order to accomplish the
objective. The fact that the objective
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is not actually accomplished is no indication that the obligated party did not
in fact utilize its Best Efforts in attempting to accomplish the objective.
"Bill of Sale" shall have the meaning set forth in Section 6.1(b).
"Business" means Seller's Logic, Memory and Discrete Power and Signal
Technologies Business Units as historically conducted and accounted for
(including Flash Memory, but excluding Public Networks, Programmable Products
and Mil Logic Products).
"Business Day" means a day which is not a Saturday, a Sunday or a
statutory or civic holiday in the State of New York or any other day on which
the principal offices of either Seller or Buyer are closed or become closed
prior to 2:00 p.m. local time whether in accordance with established company
policy or as a result of unanticipated events including adverse weather
conditions.
"Business Employees" means all individuals who, as of the Closing
Date, (i) are actively employed by or on Leave of Absence from the employ of,
any Seller Entity and whose duties, as of the Closing Date (in the case of
active employees) or immediately before their leave began (in the case of
employees on Leave of Absence), relate primarily to the Business; (ii) are on
assignment from the Business to Sematech listed on Schedule 3.10; (iii) are
marketing employees who, as of January 24, 1997, have agreed with Buyer to
become employees of Buyer upon Closing (listed on Schedule 3.10) and such
additional marketing employees who subsequently agree with Buyer to become
employees of Buyer upon Closing; or (iv) are on assignment to the Eight Inch
Wafer Fabrication Facility and listed on Schedule 3.10 (the "Fab Employees").
"Business Financial Statements" shall have the meaning set forth in
Section 3.4.
"Business Products" shall have the meaning set forth in the Technology
Licensing and Transfer Agreement between Buyer and Seller dated as of the
Closing Date, and include those set forth in Schedule 1-D.
"Business Records" shall have the meaning set forth in Section 2.1(h).
"Business Services" means the furnishing of services related to the
manufacture or sale of Business Products, including without limitation design
services and process technology services.
"Buyer" shall have the meaning set forth in the Introduction.
"Buyer's Plans" shall have the meaning set forth in Section 5.5(b).
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"Claim Notice" shall have the meaning set forth in Section 7.3(a).
"Claim Response" shall have the meaning set forth in Section 7.3(a).
"Closing" means the closing of the transactions described in Article
6.
"Closing Inventory Amount" means the net book value of the Inventory
included in the Purchased Assets on the Closing Date.
"Closing Inventory Schedule" shall have the meaning set forth in
Section 2.5(c).
"Closing Date" means the date of the Closing as determined pursuant to
Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Business" shall have the meaning set forth in Section
5.6(b).
"Competitive Portion" shall have the meaning set forth in Section
5.6(e).
"Confidential Offering Memoranda" shall have the meaning set forth in
Section 3.20.
"Contracts" shall have the meaning set forth in Section 2.1(f).
"Damage" means any and all losses, liabilities, damages, penalties,
obligations, awards, fines, deficiencies, interest, claims (including third
party claims, whether or not meritorious), costs and expenses whatsoever
(including reasonable attorneys', accountants' and environmental consultants'
fees and disbursements) resulting from, arising out of or incident to (x) any
matter for which indemnification is provided under this Agreement, or (y) the
enforcement by an indemnified party of its rights to indemnification under this
Agreement; provided, however, that Damages shall not include consequential or
incidental damages (other than consequential or incidental damages that are
awarded to third parties under matters covered by the foregoing clauses (x) or
(y)) except in the case of a material breach by Seller of its obligation to
provide indemnification pursuant to Article VII hereof with respect to
Environmental Liabilities.
"Defense Notice" shall have the meaning set forth in Section 7.3(c).
"Disputed Items" shall have the meaning assigned in Section 2.5(d).
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"Encumbrance" shall mean any encumbrance of any kind whatsoever and
includes any security interest, mortgage, deed of trust, lien, judgment, tax
lien, sewer rent, assessment, mechanics' or materialmen's liens, hypothecation,
pledge, assignment, easement, servitude, right of way, restriction, tenancy,
encroachment or burden or any other right or claim of others affecting the
Purchased Assets and any restrictive covenant or other agreement, restriction or
limitation on the use of the Purchased Assets.
"Environmental Audits" shall have the meaning set forth in Section
3.12(f).
"Environmental Laws" shall have the meaning set forth in Section
3.12(a).
"Environmental Liabilities" means, regardless of whether any of the
following are contained in any disclosure schedule to this Agreement or
otherwise disclosed to Buyer prior to the Closing, any and all losses, claims,
demands, liabilities, obligations, causes of action, damages, costs and
expenses, fines or penalties (including without limitation reasonable attorney
fees and other defense costs), known or unknown, foreseen or unforeseen, whether
contingent or otherwise, fixed or absolute, present or future asserted against
or incurred by Buyer arising out of or related to:
(i) environmental conditions, including without limitation, the
presence, Release, threat of Release or Management of Hazardous Materials,
occurring or existing prior to the Closing Date, at, on, in, under or from the
Principal Premises or any other property now or previously owned, operated or
leased by Seller Entities or any of their Affiliates or in connection with the
operation of the Business; provided however, that any Environmental Liability
for Remediation shall be only for such Remediation required by any Environmental
Law; or
(ii) environmental conditions arising from the pre-Closing
off-site transportation, storage, treatment, recycling or disposal of Hazardous
Materials prior to the Closing Date generated by or on behalf of Seller Entities
or Affiliates or in connection with the operation of the Business; or
(iii) any violation which occurred prior to the Closing of
any then-applicable Environmental Law (including without limitation costs and
expenses for pollution control or monitoring equipment required by Environmental
Laws to bring the Business into compliance with Environmental Laws and fines,
penalties and reasonable defense costs incurred for such reasonable time after
the Closing to come into compliance); or
(iv) the items identified on Schedule 1-E.
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in each case of clauses (i), (ii) and (iii), except to the extent that such
Environmental Liabilities are exacerbated by Buyer.
"Environmental Permits" shall have the meaning set forth in Section
3.12(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means (i) any corporation included with Seller in a
controlled group of corporations within the meaning of Section 414(b) of the
Code; (ii) any trade or business (whether or not incorporated) which is under
common control with Seller within the meaning of Section 414(c) of the Code;
(iii) any member of an affiliated service group of which Seller is a member
within the meaning of Section 414(m) of the Code; or (iv) any other person or
entity treated as an affiliate of Seller under Section 414(o) of the Code.
"Estoppel Certificates" shall have the meaning set forth in Section
5.10.
"Evaluation Materials" shall have the meaning set forth in Section
3.20.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Contracts" shall have the meaning set forth in Section
2.2(f).
"Excluded Equipment" shall have the meaning set forth in Section
2.2(d).
"Excluded Liabilities" shall have the meaning set forth in Section
2.3(b).
"Fairchild Subsidiaries" means the companies set forth on Schedule
3.17.
"Financing" shall have the meaning set forth in the Recap Agreement.
"Foreign Plan" shall have the meaning set forth in Section 3.19(k).
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means the government of the United States,
Hong Kong, Malaysia, the Philippines or any foreign country or any state,
province, municipality or other political subdivision thereof or therein, or any
court, tribunal, agency, department, board, instrumentality, authority or
commission (including regulatory and administrative bodies) of any of the
foregoing.
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"Governmental Permits" shall have the meaning set forth in Section
2.1(i).
"Hazardous Materials" means any hazardous, toxic or polluting
materials, substances, wastes, pollutants or contaminants (including, without
limitation, petroleum, petroleum products, radioactive materials, asbestos, or
asbestos-containing materials) which are defined by or regulated under any
Environmental Law or any other compound, mixture, element, solution or substance
which poses or may pose a present or potential hazard to human health or the
environment.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"including" or any variation thereof means "including without
limitation" and the term "including" or any variation thereof shall not be
construed to limit any general statement which it follows to the specific or
similar items or matters immediately following it.
"Indemnitee" shall have the meaning set forth in Section 7.3(a).
"Indemnitor" shall have the meaning set forth in Section 7.3(a).
"Independent Accountant" shall have the meaning set forth in Section
2.5(d).
"Interim Financial Statements" shall have the meaning set forth in
Section 3.4.
"Inventory" shall have the meaning set forth in Section 2.1(e).
"IRS" means the U.S. Internal Revenue Service.
"KEIP" shall have the meaning set forth in Section 5.5(f).
"knowledge" when used with respect to Seller, means the actual
knowledge of the individuals whose names are set forth on Schedule 1-F, after
reasonable investigation.
"Leased Real Estate" shall have the meaning set forth in Section
3.16(b)(i).
"Leases" shall have the meaning set forth in Section 3.16(b)(i).
"Leave of Absence" means an approved absence from employment that is
classified as sick time, personal leave, family leave, industrial leave or
Medical Leave.
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"Manage" or "Management", when used with respect to Hazardous
Materials, has the meaning set forth in Section 3.12(c).
"Material Adverse Effect" means any change or effect (or series of
related changes or effects) which has or is reasonably likely to have a material
adverse change in or effect upon the business, financial condition or results of
operations of the Business taken as a whole.
"Material Instruments" shall mean the Contracts described on Schedule
2.1F, the licenses, agreements and other arrangements, if any, transferred to
Buyer pursuant to the Technology Transfer and License Agreement and the
Governmental Permits described on Schedule 2.1I.
"Material Real Estate Impairment" shall mean (1) a material adverse
effect upon the value of any one or more of the individual Principal Premises so
affected or (2) material impairment of the use of, or the conduct of the
Business at, any one or more of the individual Principal Premises so affected.
"Medical Leave" means an absence from employment that is classified
as short-term disability, long-term disability or permanent medical leave.
"Non-Assignable Assets" shall have the meaning set forth in Section
2.6(a).
"Non-Assignable Patent Licenses" means licenses of patents in third
parties to which Seller is the licensee and which are not by their terms
assignable to Buyer.
"Non-Subsidiary Foreign Plan" shall have the meaning set forth in
Section 3.19(k).
"Operating Agreements" means the agreements to be entered into between
Buyer and Seller described in Section 5.3.
"Other Current Liabilities" means liabilities of the character that
would be reflected as "other current liabilities" on a balance sheet prepared on
a basis consistent with the Accounting Principles.
"Overlapping Fiscal Year" shall have the meaning set forth in Section
5.5(f).
"Owned Real Estate" shall have the meaning set forth in Section
3.16(a)(i).
"Pension Plan" shall have the meaning set forth in Section 3.19(e).
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"Permitted Encumbrances" means (i) the Encumbrances and exceptions set
forth in Schedule 2.1A-1; and (ii) imperfections in title not material in extent
or amount and which, individually or in the aggregate, do not materially
interfere with the conduct of the Business or with the use of the Purchased
Assets and do not materially affect the value of the Purchased Assets, taken
collectively.
"Permitted Fee Title Exceptions" shall have the meaning set forth in
Section 3.16(a)(ii).
"Permitted Leasehold Exceptions" shall have the meaning set forth in
Section 3.16(b)(ii).
"Person" means and includes any individual, corporation, partnership,
firm, association, joint venture, joint stock company, trust or other entity, or
any government or regulatory administrative or political subdivision or agency,
department or instrumentality thereof.
"Portland Facility" shall have the meaning set forth in Section
3.8(b).
"Principal Equipment" means all of the machinery and equipment,
fixtures, improvements, tooling, supplies, tools, dies and similar capital items
which are owned or leased by any Seller Entity and are located at the Principal
Premises, Remote Locations or elsewhere and which are primarily used or held for
use in the conduct of the Business, or which are in transit to or temporarily
removed from a location specified above and which would otherwise be included
among the items described above. Principal Equipment shall include, without
limitation, those specified items of machinery and equipment which are
identified on Schedule 2.1B but shall not include the Excluded Equipment.
"Principal Premises" means the Owned Real Estate and all of the
rights, titles, interests and estates of the Seller Entities (and of each of
them) in and to the Leased Real Estate.
"Proprietary Information" means inventions, discoveries, patentable
subject matter, patents, patent applications, industrial models, industrial
designs, trade secrets, trade secret rights, software, works, copyrightable
subject matter, copyright rights and registrations, know-how and show-how,
whether or not protectible by patent, copyright or trade secret, trademarks,
trade names, service marks, emblems, logos, insignia and related marks and
registrations, specifications, technical manuals and data, blueprints,
drawings, proprietary processes, product information and development
work-in-process.
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"Purchase Price" means the payment to be made in consideration for the
Purchased Assets as provided in Section 2.5.
"Purchase Price Note" shall have the meaning set forth in Section
2.5(b).
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"RCRA" shall have the meaning set forth in Section 3.12(c).
"Recap Agreement" means the Agreement and Plan of Recapitalization
dated January 24, 1997 between Seller and Sterling Holding Company LLC.
"Recap Closing" means the closing of the transactions under the Recap
Agreement.
"Recap Closing Date" means the date of the Recap Closing.
"Reference Amount" shall have the meaning set forth in Section 2.5(a).
"Release" shall have the meaning set forth in Section 3.12(e).
"Remediation" means investigation, cleanup, remedial action or other
response action.
"Remote Locations" means the facilities for Inventory stocking and/or
manufacturing support listed on Schedule 2.1A-2.
"Resolution Period" shall have the meaning set forth in Section
2.5(d).
"Response Period" shall have the meaning set forth in Section 7.3(a).
"Returns" means all returns, declarations, reports, statements and
other documents required under a Tax Law to be filed with a Governmental
Authority in respect of Taxes, and includes any Forms W-2, 1099 or similar
documents required under any Tax Law to be provided to a person other than a
Governmental Authority (and "Return" means any one of the foregoing Returns).
"Seller" shall have the meaning set forth in the Introduction.
"Seller Entities" means Seller and all Affiliates of Seller having an
interest in any Purchased Asset, including the Fairchild Subsidiaries.
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"Shared Contract" shall have the meaning set forth in Section 2.7.
"Specified Liabilities" means the sum of Accounts Payable, Accrued
Expenses and Other Current Liabilities.
"Statement of Allocation" shall have the meaning set forth in Section
5.2.
"Straddle Period Taxes" shall have the meaning set forth in Section
5.4(e).
"subsidiary" means as to any Person, a corporation or other entity of
which shares of stock or other equity ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation or other entity are at the time owned, directly or indirectly,
through one or more intermediaries, or both, by such Person.
"Surveyor" shall have the meaning set forth in Section 5.12.
"Surveys" shall have the meaning set forth in Section 5.12.
"Taxes" means all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, add on or alternative minimum tax, occupancy,
withholding, payroll, employment, excise, severance, stamp, value added,
occupation, premium, property (including, without limitation, real property
taxes and any assessments, special or otherwise), windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or additional
amounts with respect thereto (and "Tax" means any one of the foregoing Taxes).
"Tax Law" means a statute, regulation or administrative rule or
judicial opinion enacted, issued or promulgated for the determination,
imposition, assessment or collection of any Tax.
"Title Company" shall have the meaning set forth in Section 5.11.
"Title Policies" shall have the meaning set forth in Section 5.11.
"Transferred Employee" shall have the meaning set forth in Section
5.5(a).
"Transition Services Agreement" means the Transition Services
Agreement of even date herewith between Seller and Buyer.
"Voluntary Participation" shall have the meaning set forth in Section
7.3(c).
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1.2. Rule of Construction. No inaccuracies in a representation or warranty
as a result of any inaccuracy in any Schedule to this Agreement shall be deemed
to constitute a breach of such representation or warranty which makes reference
to such Schedule unless the aggregate effect of all such inaccuracies in all
such Schedules is material to the Business in the context of the transactions
contemplated by the Recap Agreement (including the Financing).
ARTICLE II
SALE OF ASSETS
2.1. Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date Seller shall, and shall cause the other
Seller Entities to, sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase from the Seller Entities, all of the Purchased Assets which
include the Business as a going concern and the goodwill related thereto, as the
same shall exist on the Closing Date; it being understood that such of the
Purchased Assets as shall be held by the Fairchild Subsidiaries shall not be
transferred directly to Buyer but shall be transferred to Buyer through the
transfer of ownership of the Fairchild Subsidiaries to Buyer. For purposes of
this Agreement, "Purchased Assets" shall mean all of the assets, properties and
rights which are primarily used in the conduct of the Business (except in each
case for the Excluded Assets), wherever such assets, properties and rights are
located and whether such assets are real, personal or mixed, tangible or
intangible, matured or unmatured, known or unknown, contingent or fixed, and
whether or not any of such assets have any value for accounting purposes or are
carried or reflected on or specifically referred to in Seller's books or
financial statements including:
(a) the Principal Premises;
(b) all of the Principal Equipment and any rights to the warranties
and licenses received from the manufacturers and distributors of the Principal
Equipment and to any related claims, credits, rights of recovery and set-off
with respect to such items, subject, as applicable, to the rights set forth in
Section 2.1(f);
(c) all of the motor vehicles, whether or not licensed or registered
to operate on public highways, including automobiles, trucks, self-propelled
carts, and other motorized lifting, material handling or transporting equipment
and all spare parts, fuel and other supplies, tools and other items used in the
operation or maintenance thereof which are owned or leased by a Seller Entity
and located at the Principal Premises, Remote Locations or elsewhere and which
are primarily used or held for use in the conduct of the Business, or which are
in transit to or temporarily removed from a location specified above and which
would otherwise be included among the items described above, and any rights to
the warranties received from suppliers or manufacturers of such items described
above, and any related claims, credits, rights
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of recovery and set-off with respect thereto, including without limitation all
such vehicles, spare parts, fuel and other supplies, tools and other items and
other rights set forth on Schedule 2.1C;
(d) all of the furniture and office equipment, including desks,
tables, chairs, file cabinets and other storage devices, communications
equipment, computers and office supplies, including those identified on Schedule
2.1D, which are owned or leased by a Seller Entity and located at the Principal
Premises, Remote Locations or elsewhere and which are primarily used or held for
use in the conduct of the Business, or which are in transit to or temporarily
removed from a location specified above and which would otherwise be included
among the items identified above;
(e) all inventory, wherever located (including inventory in transit),
including, without limitation, all the raw materials, work in process, recycled
materials, finished products, supplies, and spare parts located at the Principal
Premises, the Remote Locations, or elsewhere and primarily used or held for use
in the conduct of the Business, including items of the type and nature of the
materials identified as inventory in the Business Financial Statements, a
summary of which and the principal locations of which are set forth in Schedule
2.1E (the "Inventory") and any rights to the warranties received from suppliers
and any related claims, credits, rights of recovery and set-off with respect to
such Inventory;
(f) subject to Section 2.7 and subject to the terms of the Transition
Services Agreement dated as of the Closing Date between Seller and Buyer, all of
the rights and obligations under the contracts, contractual rights, agreements,
leases, purchase orders, warranty rights, sales orders and instruments which
primarily relate to the Business, including those identified on Schedule 2.1F,
and including those (i) for the lease (from Persons other than Seller or any
Affiliate of Seller) of machinery and equipment, real property, motor vehicles,
or furniture and office equipment or other property primarily used or held for
use in the conduct of the Business, (ii) for the provision (by Persons other
than Seller or any Affiliate of Seller) of goods or services primarily used or
held for use in the conduct of the Business, (iii) for the sale of goods or
performance of services by the Business, (iv) which restrain or restrict any
Person from directly or indirectly competing with the Business or from
disclosing confidential or Proprietary Information relating primarily to the
Business, and (v) any such contracts, agreements, instruments and leases entered
into by Seller or any Affiliate of Seller between the date hereof and the
Closing Date which relate primarily to the Business that are consistent with the
terms of this Agreement (collectively, the "Contracts");
(g) all mailing lists, customer lists, supplier lists, sales and
marketing or packaging materials, equipment maintenance records, warranty
information, records of plant operations and the source and disposition of
materials used and produced therein, manuals of operation, and other similar
proprietary or confidential information of the Seller Entities primarily used or
held for use in the conduct of the Business, and with respect to the Principal
Premises, all building plans, blueprints, renderings or surveys provided, that
the items set forth in this subsection (g) shall not include any information
that does not primarily relate to the Business and Seller shall be entitled to
remove or redact any such information from such items and provided, further,
that Seller shall have the right to retain copies of the items set forth in this
subsection (g);
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(h) all books and records of the Seller Entities relating to the
Business including, without limitation, all discs, tapes and other media storing
data and other information and the software and information management systems
primarily used or held for use in the conduct of the Business, including any
documentation and manuals related thereto (the materials described in
subsections (g) and (h) of this Section 2.1 hereinafter being referred to as
"Business Records"); provided, that Business Records shall not include any
information that does not primarily relate to the Business and Seller shall be
entitled to remove or redact any such information from the Business Records and
provided, further, Seller shall be entitled to retain copies of such Business
Records;
(i) all of the governmental permits, licenses, certificates of
inspection, certificates of occupancy, building permits, variances and other
licenses or permits (including Environmental Permits) relating to the use or
occupancy of the Principal Premises, approvals or other authorizations issued
with respect to the Business and which are used in, or otherwise necessary or
material to, the operation of the Business, the use of the Principal Premises,
or the conduct of the Business at the Principal Premises by Buyer, or which are
otherwise required by law to be transferred to Buyer (the "Governmental
Permits") including those Governmental Permits which are described and
identified in Schedules 2.1I and 3.12 (other than those Governmental Permits for
which transfer is not permitted by law or the issuing authority);
(j) all intellectual property rights granted to Buyer pursuant to the
Technology Licensing and Transfer Agreement dated as of the Closing Date between
Buyer and Seller;
(k) all rights of the Seller Entities to any insurance proceeds
relating to the damage, destruction or impairment of assets or other rights
described in this Section 2.1 which would have been Purchased Assets but for
such damage, destruction or impairment prior to the Closing;
(l) all of the rights, claims or causes of action of the Seller
Entities against third Persons to the extent they relate to the Purchased Assets
or the Assumed Liabilities;
(m) all of the capital stock of the Fairchild Subsidiaries;
(n) all assets (other than Excluded Assets) reflected in the May 26,
1996 balance sheet which is included in the Business Financial Statements,
together with all replacements thereof, all expansions, enhancements and
modifications thereto and all assets (other than Excluded Assets) of like
character that have been or are acquired by the Seller Entities subsequent to
such balance sheet date and on or prior to the Closing Date, primarily for use
in the Business, except to the extent such assets have been disposed of on or
after such date; and
(o) all the items, if any, listed on Schedule 2.1O.
The term "Purchased Assets" when used herein with respect to any date
prior to the Closing Date, shall be deemed to refer to the properties and assets
of the Seller Entities that would constitute the "Purchased Assets" hereunder if
the Closing were to take place on such date.
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2.2. Excluded Assets. It is hereby expressly acknowledged and agreed that
the Purchased Assets shall not include, and the Seller Entities are not selling,
transferring or assigning to Buyer, and Buyer is not purchasing or acquiring
from the Seller Entities, all properties and assets of the Seller Entities that
are not included in the Purchased Assets pursuant to Section 2.1 or that are
excluded by this Section 2.2 (such properties and assets collectively the
"Excluded Assets"), including:
(a) any of the Seller Entities' cash, bank deposits or similar cash
items existing as of the close of business on the Closing Date;
(b) all of the accounts, notes and finance receivables generated by
the Business and existing as of the close of business on the Closing Date,
including, without limitation, all funds, refunds, receivables, credits,
offsets, or reimbursements, claims, debts, obligations and such other rights,
together with all accrued interest thereon, existing as of the close of business
on the Closing Date to the extent and in the amounts that such items would be
reflected as accounts or notes receivable (or as any other asset related
thereto) on a balance sheet of the Business as of the Closing Date prepared in
accordance with the Accounting Principles (the "Accounts Receivable");
(c) any claim, right or interest of the Seller Entities in and to any
refund for Taxes for any periods prior to the Closing Date;
(d) any of the equipment located at the Principal Premises and listed
on Schedule 2.2D (the "Excluded Equipment");
(e) all assets attributable or related to any Benefit Plan except as
provided in Section 5.5;
(f) all of the Contracts set forth on Schedule 2.2F (the "Excluded
Contracts") and all Shared Contracts;
(g) all of the rights, claims or causes of action of the Seller
Entities against third Persons to the extent they do not relate to the Business
or they relate to the Excluded Assets or the Excluded Liabilities;
(h) all intellectual property of Seller except as described in
Section 2.1(j);
(i) the shares of stock of Wafer Scale Integration Inc. owned or held
by Seller;
(j) the work in process (including die banks) at the locations set
forth on Schedule 2.2J to be delivered to Seller under the Operating Agreements;
and
(k) the capital stock of any Seller Entity other than the Fairchild
Subsidiaries.
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2.3. Assumed Liabilities; Excluded Liabilities.
(a) On the Closing Date, Buyer shall execute and deliver to Seller an
assumption agreement in the form set forth in Exhibit 2.3A (the "Assumption
Agreement") pursuant to which Buyer shall assume and agree to pay, perform or
otherwise discharge, in accordance with their respective terms and subject to
the respective conditions thereof and subject to the provisions of Sections
2.3(b), 2.6 and 2.9, all of the Assumed Liabilities. As used herein, "Assumed
Liabilities" means any and all liabilities of the Seller Entities in respect of
the Business of any nature, whether direct or indirect, known or unknown, or
absolute or contingent, to the extent arising out of or relating to the conduct
of the Business or the ownership and operation of the Purchased Assets,
including, without limitation, the obligations and liabilities set forth under
the heading "Assumed by FSC" on Schedule 1-A and 1-B, but excluding the Excluded
Liabilities.
(b) Buyer shall not assume or be obligated to pay, perform or
otherwise discharge any of the following obligations or liabilities of Seller or
any of its Affiliates, whether or not related to the Business and whether direct
or indirect, known or unknown, or absolute or contingent (all of such
obligations and liabilities not so assumed being herein called the "Excluded
Liabilities"):
(i) any obligations or liabilities of any Seller Entity or any
of its Affiliates (including, without limitation, any
Environmental Liability) incurred by any Seller Entity or
any of its Affiliates in connection with the conduct of
their businesses other than the Business, including those
associated with any "shelf" companies acquired by any Seller
Entity in connection with the transactions contemplated
hereby;
(ii) any obligations of any Seller Entity or any of its
Affiliates (other than obligations of Buyer under this
Agreement, the Operating Agreements and the Shareholders
Agreement (as defined in the Recap Agreement)) arising under
this Agreement, the Recap Agreement, the Operating
Agreements or the Shareholders Agreement (as defined in the
Recap Agreement);
(iii) any intercompany payables and liabilities or obligations of
any Seller Entity to any of its Affiliates;
(iv) any liabilities or obligations to the extent related to
Excluded Assets;
(v) any Taxes of a Fairchild Subsidiary with respect to any
taxable period that ends on or prior to the Closing Date
except to the extent such Taxes result from (A) actions
taken by Buyer after Closing unless Buyer is required to
take such actions under an applicable Tax Law or under this
Agreement or (B) Buyer's failure to take actions required to
be taken by Buyer under an applicable
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Tax Law or under this Agreement; any Taxes of a Fairchild
Subsidiary with respect to any period that begins before and
ends after the Closing Date to the extent such Taxes are
allocable to the portion of the period up to the day before
the Closing Date;
(vi) all of the Seller Entities' liabilities for Taxes that have
been or may be incurred as a result of the Seller Entities
operation of the Business or ownership of the Purchased
Assets before the Closing Date;
(vii) any liability allocated to Seller Entities for Taxes incident
to or arising from the consummation of the transactions
contemplated under this Agreement as set forth in Section
8.3;
(viii) any liability for any Taxes of the Seller Entities or of
any consolidated, combined or unitary group of which a
Seller Entity is or was a member with respect to periods
ending on or prior to the Closing Date or beginning prior
to and ending after the Closing Date, including (but not
limited to) any liability pursuant to Treasury Regulation
Section 1.1502-6 or any analogous state, local or foreign
tax provisions except to the extent such Taxes result
from (A) actions taken by Buyer after Closing unless
Buyer is required to take such actions under an
applicable Tax Law or under this Agreement or (B) Buyer's
failure to take actions required to be taken by Buyer
under an applicable Tax Law or under this Agreement;
(ix) any liability for Taxes of another Person (other than a
Fairchild Subsidiary and other than with respect to
withholdings related to payments to another Person after the
Closing) resulting from an agreement entered into by any
Seller Entity or by any Fairchild Subsidiary prior to the
Closing Date, pursuant to which any Seller Entity or any
Fairchild Subsidiary has an obligation in respect of the
Taxes of such other Person;
(x) all of the Specified Liabilities (other than the liabilities
and obligations set forth under the heading "Amts to be
Assumed by FSC" on Schedule 1-B designated on such schedule
to be assumed by Buyer), whether direct or allocated,
existing as of the close of business on the Closing Date;
(xi) all liabilities in respect of customer returns and
allowances, including, without limitation, "ship from stock
and debit" liabilities, in respect of Business Products
shipped prior to Closing to OEM customers;
(xii) any liability allocated to Seller pursuant to Section 5.5;
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(xiii) any liability or obligation of any Seller Entity or any of
its Affiliates for indemnification of, or advancement of
expenses or payment of insurance proceeds to, any present
or former director or officer of (or other person serving
in a fiduciary capacity at the request of) any Seller
Entity or any of its Affiliates based upon an actual or
alleged breach of fiduciary duty of such person prior to
the Closing;
(xiv) any Environmental Liabilities;
(xv) all liabilities and obligations arising out of, resulting
from or relating to claims, whether founded upon negligence,
strict liability in tort or other similar legal theory (but
not breach of warranty), seeking compensation or recovery
for or relating to injury to person or damage to property
arising out of the conduct of the Business before Closing;
(xvi) any liability or obligation arising out of or relating to
any business or product line formerly owned or operated by
any Seller Entity or any predecessor thereof but not
presently so owned or operated;
(xvii) any liability or obligation arising out of, or related to,
any indemnification or other provision under any
contract or other agreement pursuant to which any
sale or disposition was made of any business or
product line formerly owned or operated by any Seller
Entity or any predecessor thereof but not presently
so owned or operated;
(xviii) any liability or obligation of any Seller Entity (other
than the Fairchild Subsidiaries) or any of its Affiliates
(other than the Fairchild Subsidiaries) arising out of
matters occurring, or obligations incurred, after the
Closing;
(xix) any liabilities or obligations of any Seller Entity (other
than the Fairchild Subsidiaries) for any professional,
financial advisory or consulting fees and expenses
incident to or arising out of the negotiation,
preparation, approval or authorization of this Agreement,
the Recap Agreement, the Operating Agreements and the
transactions contemplated hereby or thereby, or any other
proposed transaction for the direct or indirect sale of
the Business or any portion thereof, including without
limitation, the fees, expenses and disbursements of
Seller's counsel and accountants (including accountants
fees, expenses and disbursements in connection with the
preparation of the Business Financial Statements but
excluding those to the extent related to the Financing
(as defined in the Recap Agreement)) and any liability or
obligation to Deutsche Morgan Grenfell or to BA Partners;
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(xx) the liabilities and obligations of Seller pursuant to
Section 2.6(c) and any liability or obligation of any Seller
Entity or any of its Affiliates arising out of any Shared
Contract;
(xxi) any liability or obligation of any Seller Entity or any of
its Affiliates to the extent the amount of such
liability or obligation is covered by a policy of
insurance or other indemnity agreement maintained by or
for the benefit of any Seller Entity or any of its
Affiliates, unless the rights under such policy of
insurance or indemnity agreement have been assigned to
Buyer;
(xxii) any liability or obligation of any Seller Entity or any of
its Affiliates for funded debt and indebtedness for
borrowed money, including obligations evidenced by
notes, bonds, debentures or similar instruments, and
including any guaranties of any of the foregoing
provided, however, that funded debt and indebtedness
for borrowed money shall not include any lease or
deferred payment obligations for property or services;
(xxiii) any liability or obligation to which Buyer, any Purchased
Assets or the Business becomes subject that would not
otherwise constitute an Assumed Liability arising as a
result of failure to comply with bulk sales laws or any
similar law;
(xxiv) any liability or obligation for which Seller has agreed to
indemnify Buyer under the Technology Licensing and Transfer
Agreement of even date herewith between Buyer and Seller;
(xxv) any liability or obligation under the heading "Total Amount
Retained by NSC" on Schedule 1-B; and
(xxvi) any liability or obligation designated as an Excluded
Liability on any Schedule to this Agreement.
2.4. THE CLOSING. The Closing shall take place at the office of Dechert
Price & Rhoads, 30 Rockefeller Plaza, New York, New York on the Recap Closing
Date (such date and time being herein called the "Closing Date"). The effective
time of the transactions contemplated hereby shall be deemed to be the opening
of business on the Closing Date.
2.5. PURCHASE PRICE. (a) The purchase price (the "Purchase Price") for the
Purchased Assets and the other agreements of Seller stated herein shall be
$549.8 million (subject to the adjustments set forth in paragraphs (B), (C) and
(D) on Schedule 1 of the Recap Agreement) payable as provided in Section 2.5(b)
plus Buyer's assumption of the Assumed Liabilities. The Purchase Price shall be
subject to a dollar-for-dollar adjustment to the extent the Closing Inventory
Amount is greater or less than $67,342,000 (the "Reference Amount").
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(b) The Purchase Price shall be paid as follows: At the
Closing Buyer will deliver to Seller Buyer's demand note (and demand notes of
Fairchild Subsidiaries) in the aggregate principal amount of $400,960,000
(the "Purchase Price Note") in the form attached hereto as Exhibit 2.5B
and a certificate representing 100 shares of Buyer's Common Stock, par
value $.01 per share.
(c) Within sixty (60) days after the Closing Date, Seller will
deliver to Buyer a schedule (the "Closing Inventory Schedule") setting forth the
Closing Inventory Amount. The Closing Inventory Schedule shall be prepared in
accordance with GAAP applied on a basis consistent in all respects with the
accounting principles, policies and methodologies reflected in the May 26, 1996
statement of net assets included in the Business Financial Statements (the
"Accounting Principles").
(d) If, within forty-five (45) days after the delivery of the
Closing Inventory Schedule, Buyer determines in good faith that the Closing
Inventory Schedule has not been prepared in accordance with the Accounting
Principles or otherwise disputes any item on the Closing Inventory Schedule,
Buyer shall deliver to Seller within such period written notice specifying in
reasonable detail all disputed items and the basis therefor (collectively, the
"Disputed Items"). The failure by Buyer to provide such notice of Disputed
Items to Seller within such period will constitute Buyer's acceptance of the
Closing Inventory Schedule. Buyer and Seller shall, within ten (10) days
following the delivery of such notice of Disputed Items to Seller (the
"Resolution Period"), negotiate in good faith to resolve such Disputed Items
to their mutual satisfaction. At the conclusion of the Resolution Period,
Seller and Buyer shall refer all unresolved Disputed Items to Coopers &
Lybrand, or any other "big six" independent accounting firm (which has not
previously been engaged by either Seller or Buyer for the preparation of
such party's audited financial statements) as Seller and Buyer shall
mutually agree upon (the "Independent Accountant"). The Independent
Accountant shall make a determination with respect to each Disputed Item
within fifteen (15) days after its engagement by Seller and Buyer to resolve
such Disputed Items, which determination shall be made on the basis of whether
the Closing Inventory Schedule has been prepared in accordance with the
Accounting Principles. All determinations by the Independent Accountant
shall be final, binding and conclusive on the parties hereto. Buyer and
Seller shall each pay one-half of all of the costs incurred in connection
with the engagement of the Independent Accountant.
(e) If the Closing Inventory Amount (as determined by the Closing
Inventory Schedule and adjusted by the resolution of the Disputed Items, if any)
(i) exceeds the Reference Amount, Buyer shall, within ten (10) days after a
final determination of the Closing Inventory Amount, pay to Seller by wire
transfer of immediately available funds an amount equal to such excess, together
with interest on such amount from the Closing Date to the date of such payment
at a rate of ten percent (10%) per annum, or (ii) is less than the Reference
Amount, Seller shall, within ten (10) days after a final determination of the
Closing Inventory Amount, pay to Buyer by wire transfer of immediately available
funds an amount equal to such deficiency, together with interest on such amount
from the Closing Date to the date of such payment at a rate of ten percent (10%)
per annum. Any such adjustment shall be made notwithstanding the fact that the
Purchase Price Note may have been repaid.
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2.6. CONSENT OF THIRD PARTIES; FURTHER ASSURANCES.
(a) From time to time following the Closing, Seller shall execute and
deliver, or cause to be executed and delivered, to Buyer such additional
instruments of conveyance and transfer as Buyer may reasonably request or as may
be otherwise reasonably necessary to more effectively convey or transfer to, and
vest in, Buyer and put Buyer in possession of, any part of the Purchased Assets.
Nothing in this Agreement shall be construed as an attempt or agreement to
assign any asset, contract, lease, permit, license or other right which would
otherwise be included in the Purchased Assets but which is by its terms or by
law nonassignable without the consent of the other party or parties thereto or
any Governmental Authority unless such consent shall have been given, or as to
which all the remedies for the enforcement thereof enjoyed by Seller, any other
Seller Entity or the Business would not, as a matter of law, pass to Buyer as an
incident of the assignments provided for by this Agreement (the "Non-Assignable
Assets"). Seller agrees to use its Best Efforts to obtain such consent
promptly. At such time as any Non-Assignable Assets is properly assigned to
Buyer, such Non-Assignable Asset shall become a Purchased Asset. Following the
Closing and until such time as such Non-Assignable Assets may be properly
assigned to Buyer, such Non-Assignable Assets shall be held by Seller in trust
for Buyer and the covenants and obligations thereunder shall be performed by
Buyer in the name of Seller and all benefits and obligations existing thereunder
shall be for the account of Buyer. During such period, Seller shall take or
cause to be taken such action in its name or otherwise as Buyer may reasonably
request, at Buyer's expense, so as to provide Buyer with the benefits of the
Non-Assignable Assets and to effect collection of money or other consideration
to become due and payable under the Non-Assignable Assets and Seller shall
promptly pay over to Buyer all money or other consideration received by it (or
its Affiliates) in respect of all Non-Assignable Assets. Following the Closing,
Seller authorizes Buyer, to the extent permitted by applicable law and the terms
of the Non-Assignable Assets, at Buyer's expense, to perform all of the
obligations and receive all of the benefits under the Non-Assignable Assets and
appoints Buyer its attorney-in-fact to act in its name on its behalf (and on
behalf of its Affiliates) with respect thereto.
(b) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement by Seller to assign or delegate, or
by Buyer to assume and agree to pay, perform or otherwise discharge, any
Non-Assignable Asset if an attempted assignment, delegation or assumption
thereof without the consent of a third Person (including, without limitation,
any Governmental Authority) thereto would constitute a breach thereof unless and
until such consent is obtained.
(c) Except as set forth in Section 2.6(a), Section 2.7 or as provided
in the Transition Services Agreement, to the extent reasonably practicable, the
Seller Entities shall perform all obligations and be entitled to all the
benefits under the Non-Assignable Assets; provided, however, that Seller shall
be liable for the failure to perform any such obligation.
2.7. SHARED CONTRACTS. Subject to the terms of the Transition Services
Agreement, to the extent any of the Contracts relates both to the Business and
to other businesses of the Seller Entities ("Shared Contracts") such Shared
Contracts shall not be assigned to Buyer. At Buyer's request, with respect to
any Shared Contract, the Seller Entities shall use Best Efforts to obtain the
agreement of the other party or parties to any Shared Contract to enter into a
separate
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agreement with Buyer with respect to the matters covered by such Shared Contract
that relate to the Business. Buyer shall be responsible for fulfilling the
obligations under the Shared Contracts related to or arising from benefits
received by Buyer pursuant to the Shared Contracts as contemplated by the
Transition Services Agreement.
2.8. APPORTIONMENT AT CLOSING DATE; CUSTOMER BILLING.
(a) At the Closing, the parties shall make without duplication
customary closing adjustments with respect to the conveyance of the Principal
Premises as of the Closing Date and the usual adjustments relating to the
Business as of the Closing Date, including prepaid lease payments, security
deposits, rents, real estate taxes, local improvements charges, assessments
(special and ordinary), sewer impost charges, utility charges, water rents,
monthly maintenance charges, rebates and royalties, deposits and prepaid
expenses with any public utility or any municipal, governmental or other public
authority, wages and any other ongoing charges, and all such payments, taxes and
charges shall be apportioned and adjusted as of the Closing Date, and at the
Closing the net amount thereof shall be pro rata paid by Seller to Buyer or paid
by Buyer to Seller, as the case may be. Any such apportionments and adjustments
shall be subject to correction for any errors or omissions that subsequently may
be discovered provided that the party discovering such error or omission
provides written notice of same to the other party. Such other party shall,
within 15 days after receipt of such notice, reimburse the party delivering such
notice for the full amount of such error or omission.
(b) In the event that Seller or any of its Affiliates receives
payment after the Closing Date on invoices issued by Buyer relating to product
sold or services rendered on or after the Closing Date, Seller will promptly
notify Buyer of such receipt and will promptly remit, or will cause such
Affiliate to promptly remit, such payment to Buyer. In the event that Buyer or
any Affiliate of Buyer receives payment after the Closing Date on invoices
issued by Seller relating to product sold or services rendered prior to the
Closing Date that have given rise to accounts receivable that are included in
the Excluded Assets, Buyer will promptly notify Seller of such receipt and will
promptly remit, or will cause such Affiliate to promptly remit, such payment to
Seller.
2.9. WARRANTY CLAIMS. Except as provided in Section 2.3 and this Section
2.9, all of the obligations and liabilities of the Seller Entities with respect
to any Business Products transferred to Buyer as part of the Purchased Assets
which are shipped or provided by Buyer on or after the Closing shall be for the
account of, and exclusively the obligation of Buyer. Buyer shall assume the
obligation to satisfy all warranty claims or liabilities with respect to any
products or services shipped or provided by Seller prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1. ORGANIZATION AND AUTHORITY. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate
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power and corporate authority to execute and deliver this Agreement and the
Operating Agreements and effect the transactions contemplated hereby and thereby
and has duly authorized the execution, delivery and performance of this
Agreement and the Operating Agreements by all necessary corporate action.
Seller has all corporate power and corporate authority necessary to carry on the
Business as now conducted and to own or lease and operate its properties as and
in the places where such Business is now conducted and such properties are now
owned, leased or operated.
3.2. AUTHORIZATION; BINDING OBLIGATION. This Agreement and the Operating
Agreements have been duly executed and delivered by Seller, and this Agreement
and the Operating Agreements are the valid and legally binding obligations of
Seller, enforceable against it in accordance with their terms.
3.3. NO VIOLATIONS. Except as disclosed on Schedule 3.3:
(a) The execution, delivery and performance of this Agreement and the
Operating Agreements by the Seller Entities and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) result in a
breach or violation of any provision of Seller's charter or by-laws, (ii) result
in a violation of any statute, rule, regulation or ordinance applicable to the
Seller Entities, or any one or more of the Principal Premises, which violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or a Material Real Estate Impairment, (iii) subject to
the receipt of any consents of third Persons described in clauses (i)-(iii) of
Section 3.3(b), violate or result in a breach of or constitute an event of
default (or an event which might, upon the passage of time or the giving of
notice, or both, constitute an event of default) under any provision of, result
in acceleration or cancellation of any obligation under, or give rise to a right
by any party to terminate or amend its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, indenture, lien, Material
Instrument, material lease, agreement, instrument, order, judgment or decree or
other material arrangement or commitment (x) (1) to which any Seller Entity is a
party or (2) which primarily relates to the Business or the Purchased Assets and
(y) which violation, breach or default could be reasonably expected to have a
Material Adverse Effect or a material adverse effect on Seller, taken as a
whole, or with respect to Principal Premises, could be reasonably expected to
have a Material Real Estate Impairment (iv) violate any order, judgment, decree,
rule or regulation of any court or any governmental agency or body (x) having
jurisdiction over any Seller Entity or any of its assets or properties, and
which violation could be reasonably expected to have a Material Adverse Effect
or a material adverse effect on Seller, taken as a whole, or on the performance
by Seller of its obligations under this Agreement, or which could be reasonably
expected to have a Material Real Estate Impairment and (y) having jurisdiction
over the Business or the Purchased Assets.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Person is required by any Seller Entity in
connection with the execution and delivery of this Agreement, the Operating
Agreements or the consummation of the transactions contemplated hereby or
thereby, except for (i) any filings required to be made under the HSR Act; (ii)
consents of third Persons which are required to transfer or assign to Buyer any
Purchased Assets or assign the benefits of or delegate performance with regard
thereto, which consents are disclosed on Schedule 3.3; and (iii) such consents,
approvals, orders or
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authorizations, registrations, declarations or filings where failure of
compliance would not, individually or in the aggregate, have a Material Adverse
Effect or a Material Real Estate Impairment.
3.4. FINANCIAL STATEMENTS. Attached hereto as Schedule 3.4 are the
Combined Financial Statements of the Business for the three years ended May 26,
1996 (such financial statements of the Business being referred to collectively
herein as the "Business Financial Statements") and the Combined Financial
Statements of the Business for the six months ended November 24, 1996 and
November 26, 1995 (such financial statements of the Business being referred to
collectively herein as the "Interim Financial Statements"). The Business
Financial Statements and the Interim Financial Statements have been compiled
from and are in all material respects in accordance with Seller's books and
records for the Business and (i) fairly present the financial condition, assets
and liabilities of the Business as of their respective dates and the results of
operations of the Business for the periods then ended; (ii) have been prepared
in accordance with GAAP consistently applied; (iii) in the case of the Business
Financial Statements, are accompanied by the unqualified opinion of KPMG Peat
Marwick; and (iv) conform to the requirements of Regulation S-X of the
Securities and Exchange Commission. The Business Financial Statements reflect
allocations of expense for certain common support functions performed
predominately outside of the Principal Premises, such as general and
administrative support and marketing and sales support, which allocations are
disclosed on Schedule 3.4 hereto. Since January 1, 1994 the methodology of
making such allocations has not changed in any material respect. If the Closing
had occurred on September 29, 1996, the Closing Inventory Amount as of such date
would not have been less than the mean Closing Inventory Amount for such fiscal
year. During the five fiscal years ended May 26, 1996, there has not been any
material change in the method of accounting or keeping of books of account or
accounting practices with respect to the Business, except as described in
Seller's annual reports on Form 10-K for the five fiscal years ended May 26,
1996 as filed with the Securities and Exchange Commission.
3.5. ABSENCE OF CHANGES. Except as disclosed on Schedule 3.5, since May
26, 1996:
(a) Seller has (i) conducted the Business only in the usual and
ordinary course and (ii) operated the Business in accordance with past
practices;
(b) there has not been any change (or series of changes) in the
business, financial condition or results of operations of the Business, other
than changes arising in the ordinary course of business, none of which changes,
individually or in the aggregate, has had or reasonably would be expected to
have a Material Adverse Effect;
(c) no Seller Entity has made or promised to make any increase in any
salaries, rates of pay or other compensation or benefits of any Business
Employees, except for customary increases and progressions for employees which
increases and progressions were made in the ordinary course of business or
changes in benefits generally provided to Seller's occupational and/or
management employees;
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(d) the Business has not suffered any damage, destruction or loss of
any tangible assets or properties which would have been included as Purchased
Assets but for such damage, destruction or loss (whether or not covered by
insurance) in excess of $500,000;
(e) the Business has not suffered any strike or other labor trouble
that has had or would reasonably be expected to have a Material Adverse Effect
on the relationship between any Seller Entity and the Business Employees, and
has not entered into any material agreement or material negotiation with any
labor union or other collective bargaining representative of any Business
Employees;
(f) there has not been any change or, to the knowledge of Seller, any
threat of any change in any of its relations with, or any loss or, to the
knowledge of Seller, threat of loss of, any of the suppliers, distributors or
customers of the Business which, individually or in the aggregate, has had or
reasonably could be expected to have a Material Adverse Effect;
(g) other than in the ordinary course, there has not been any
cancellation, expiration, non-renewal or waiver of any right under any contract,
lease, agreement, license or permit which cancellation, expiration, non-renewal
or waiver, has had or could reasonably be expected to have a Material Adverse
Effect; and
(h) there has not been any sale, transfer or other disposition of, or
subjection to any Encumbrance of, any assets, properties or rights of the
Business, except for Permitted Encumbrances, Permitted Fee Title Exceptions,
Permitted Leasehold Exceptions, sales of inventory or obsolete or damaged
equipment or retirement of equipment, in each case in the ordinary course of
business, and sales of equipment to third Persons other than in the ordinary
course of business in an aggregate amount less than $500,000.
3.6. ASSETS. Except as disclosed on Schedule 3.6, the Seller Entities have
and upon consummation of the transactions contemplated by this Agreement, Buyer
(or the Fairchild Subsidiaries, as the case may be) will have good and
marketable title to, or leasehold interest in, all of the Purchased Assets
(other than the Non-Assignable Assets) free and clear of any Encumbrance except
for (i) Permitted Encumbrances, Permitted Fee Title Exceptions and Permitted
Leasehold Exceptions; (ii) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlords' or other like liens securing obligations
that are not delinquent; and (iii) liens for taxes and other governmental
charges which are not due and payable or which may be paid without penalty.
3.7. PERSONAL PROPERTY. Except as set forth on Schedule 3.7, to Seller's
knowledge, the items of personal property included in the Purchased Assets and
presently and actively used in the operation of the Business are in good
operating condition, free of any defects (except those resulting from normal
wear and operation) which individually or in the aggregate, reasonably could be
expected to have a Material Adverse Effect.
3.8. PERMITS, LICENSES. (a) Except as set forth on Schedule 2.1I, Schedule
3.8 or Schedule 3.12, there are no material Governmental Permits, licenses,
certificates of inspection or other authorizations, necessary for or used to
carry on the Business as now being conducted or to use and occupy any one or
more of the Principal Premises as now being used, which are
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required by currently effective laws, rules or regulations, other than, in each
case, those Governmental Permits, licenses, certificates of inspection or other
authorizations the absence of which, individually or in the aggregate, could not
reasonably be expected to have a (i) Material Adverse Effect on the Business as
now being conducted, or (ii) Material Real Estate Impairment with respect to the
use and occupancy of any one or more of the Principal Premises as now being
used.
(b) Except as set forth on Schedule 2.1I or Schedule 3.12, there are
no material Governmental Permits, licenses, certificates of inspection or other
authorizations, necessary for the division of the existing facility owned by
Seller Entities in South Portland, Maine into two parcels of real estate, one of
which shall be owned by Buyer and constitute Owned Real Estate as listed on
Schedule 2.1A (the "Portland Facility") or the conduct of the Business, as
contemplated subsequent to the Closing, or the use and occupancy of the Portland
Facility as contemplated subsequent to the Closing, which are required by
currently effective laws, rules or regulations other than, in each case, those
Governmental Permits, licenses, certificates of inspection or other
authorizations, the absence of which, individually or in the aggregate, could
not reasonably be expected to have a (i) Material Adverse Effect on the Business
at the Portland Facility as contemplated subsequent to the Closing, or (ii)
Material Real Estate Impairment with respect to the use and occupancy of the
Portland Facility as contemplated subsequent to the Closing.
3.9. COMPLIANCE WITH LAWS AND LITIGATION. (a) Except as set forth on
Schedule 3.9, with respect to the Business and the Principal Premises, the
Seller Entities are in compliance with all applicable laws, rules, regulations,
ordinances, decrees, orders, judgments, permits and licenses of or from
governmental authorities, including, without limitation, those relating to the
use and operation of any one or more of the Principal Premises, except for such
failures or non-compliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or a Material Real
Estate Impairment. Except as set forth on Schedule 3.9, there are no actions,
suits, proceedings or governmental investigations pending or, to the knowledge
of Seller, threatened against it with respect to the Business or the Purchased
Assets which individually or in the aggregate, could be reasonably expected to
have a Material Adverse Effect or a Material Real Estate Impairment.
(b) Except as set forth on Schedule 3.9, with respect to the Business
contemplated to be conducted at the Portland Facility subsequent to the Closing,
the Seller Entities will be in compliance with all applicable laws, rules,
regulations, ordinances, decrees, orders, judgments, permits and licenses of or
from governmental authorities, including, without limitation, those relating to
the use and operation of the Portland Facility contemplated subsequent to the
Closing, except for such failures or non-compliance which, individually or in
the aggregate, could not reasonably be expected to have a (i) Material Adverse
Effect on the Business at the Portland Facility as contemplated subsequent to
the Closing, or (ii) Material Real Estate Impairment with respect to the use and
occupancy of the Portland Facility as contemplated subsequent to the Closing.
Except as set forth on Schedule 3.9, there are no actions, suits, proceedings or
governmental investigations pending or, to the knowledge of Seller, threatened
against it with respect to the contemplated division of the Portland Facility or
with respect to the Business contemplated to be conducted at the Portland
Facility subsequent to the Closing, which
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individually or in the aggregate, could be reasonably expected to have a
Material Adverse Effect or a Material Real Estate Impairment.
3.10. EMPLOYEES. (a) Schedule 3.10 lists the names, job title, date of
hire or seniority date, and assigned location of all Business Employees
(designated as union-represented or not) as of its date, which date is not
earlier than the last day of the fiscal period ending not more than six weeks
prior to the date hereof. Except as set forth on Schedule 3.10, all individuals
whose primary responsibility relates to, and who are employed in the conduct of,
the Business are employed by the Seller Entities and there are no other such
individuals (including "leased employees" as defined in Section 414(n) of the
Code) whose continued services are material to the Business as a whole. None of
the Business Employees is covered by any union, collective bargaining or similar
agreements. Seller has provided Buyer with a true and correct copy of the
current collective bargaining agreements affecting the Business Employees.
Except as set forth on Schedule 2.1F, there are no written employment or
consulting agreements that constitute an Assumed Contract.
(b) Except as disclosed in Schedule 3.10 and except for any of the
following that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect: (i) there is no unfair labor practice charge
pending or, to the knowledge of Seller, threatened against any Seller Entity
relating to any of the Business Employees; (ii) there is no labor strike or
stoppage relating to any of the Business Employees actually pending or, to the
knowledge of Seller, threatened against or involving any Seller Entity; (iii) no
material labor grievance relating to any of the Business Employees is pending
or, to the knowledge of Seller, threatened; (iv) the Seller Entities have not in
the past three years experienced any work stoppage relating to any of the
Business Employees; (v) to the knowledge of Seller, within the past two years,
the Seller Entities have not been the subject of any union organizational
campaign with respect to any of the Business Employees; (vi) no Seller Entity
has any material labor negotiations in process with any labor union or other
labor organization relating specifically to the Business Employees; and (vii) to
the knowledge of Seller, there are no efforts in process by unions to organize
any Business Employees who are not now represented by recognized collective
bargaining agents.
3.11. AGREEMENTS. Schedule 2.1F contains a complete and correct list
of all outstanding Contracts (other than the Excluded Contracts) (a) which have
unexpired terms of more than one (1) year and cannot be terminated by the Seller
Entity which is a party thereto without penalty or payment on thirty (30) days
notice or less; (b) which would require over the full term thereof payments by
or to any Seller Entity or the Business of more than $250,000; or (c) pursuant
to which there were payments by or to any Seller Entity or the Business of more
than $250,000 for the calendar year ended December 31, 1995. True and correct
copies of the Contracts (other than the Excluded Contracts) listed on Schedule
2.1F have been delivered or made available to Buyer. Each of such Contracts is
valid, binding and enforceable against the Seller Entity which is a party
thereto, and to the knowledge of Seller, the other parties thereto, in
accordance with its terms and is in full force and effect, except those the
absence of which could not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 2.1F or Schedule 3.11, the Seller
Entities, and to the knowledge of Seller, each of the other parties thereto,
have performed in all material respects all obligations required to be performed
by them under, and are not in default in any material respect under, any of such
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Contracts and no event has occurred which, with notice or lapse of time, or
both, would constitute such a default, except for any such defaults which could
not reasonably be expected to have a Material Adverse Effect. Except as
disclosed on Schedule 2.1F or Schedule 3.11, no Seller Entity has received any
written claim from any other party to any such Contract that any Seller Entity
has breached any obligations to be performed by it thereunder, or is otherwise
in default or delinquent in performance thereunder, except any of the foregoing
which could not reasonably be expected to have a Material Adverse Effect. There
are no agreements not to compete binding upon any Seller Entity which affect or
restrict the conduct of the Business as currently conducted by the Seller
Entities or could reasonably be expected to affect or restrict the conduct of
the Business as currently conducted by the Seller Entities by Buyer (or any
Fairchild Subsidiary) after the Closing.
3.12. ENVIRONMENTAL MATTERS. Seller represents and warrants that in
relation to the Business and except as disclosed on Schedule 3.12 and except as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Business as a whole:
(a) The Seller Entities and their Affiliates have conducted and are
now conducting the Business in compliance with all applicable foreign, federal,
state and local environmental and employee protection laws, rules, regulations,
the common law, judgments orders, consent agreements, work practices and
standards in existence on the Closing Date ("Environmental Laws") and, to
Seller's knowledge, have conducted the Business in compliance with environmental
laws that existed prior to the Closing Date.
(b) The Seller Entities hold and are and have been in compliance with
all permits, certificates, licenses, approvals, registrations and authorizations
required under Environmental Laws ("Environmental Permits"), and all such
Environmental Permits are in full force and effect and are transferable or
assignable to Buyer. The Seller Entities have made or will make before the
Closing timely application or notification for the renewal of all Environmental
Permits for which Environmental Laws require that applications or notices must
be filed on or before the Closing to maintain the Environmental Permits in full
force and effect up to and through the Closing. Seller and Buyer will use their
respective Best Efforts to obtain any and all material consents, approvals,
authorizations, transfers, assignments or issuances of such Environmental
Permits to the Buyer before the Closing. Schedule 3.12 lists all such material
Environmental Permits and identifies whether such permits are transferrable or
assignable.
(c) No Seller Entity nor any of its subsidiaries or affiliates uses,
possesses, generates, treats, manufactures, processes, handles, stores,
recycles, transports or disposes of ("Manage" or "Management") Hazardous
Materials in connection with the operations of the Business in quantities or in
a manner which requires a treatment, storage or disposal permit or which imposes
generator requirements under the Resource Conservation and Recovery Act, as
amended ("RCRA") or any similar Environmental Laws.
(d) No Seller Entity nor any of its Affiliates has received any
written notice, citation, summons, order or complaint, no penalty has been
assessed or is pending or, to the knowledge of Seller or any of its Affiliates,
threatened by any third party including any
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Governmental Authority or other entity with respect to the Management or Release
of Hazardous Materials by or on behalf of any Seller Entity, its Affiliates in
relation to the Business or exposure to such Hazardous Materials. No Seller
Entity nor any of its Affiliates has received any written and, to the best of
their knowledge after due inquiry, no one else has received any requests for
information, notices of claim, demands or other notifications that it or they
are or may be potentially responsible with respect to any investigation or
cleanup of Hazardous Materials Released or Managed at the Principal Premises or
at any other property owned, operated or leased by any Seller Entity or any of
its Affiliates in connection with the Business or at any other property,
facility or off-site location to which the Hazardous Materials Released or
Managed by any Seller Entity or any of its Affiliates in connection with the
Business have been transported or disposed of or have come to be located.
(e) To Seller's knowledge, no Hazardous Materials have been released,
spilled, leaked, discharged, disposed of, pumped, poured, emitted, emptied,
injected, leached, dumped or allowed to escape ("Released") at, on, about, under
or from the Principal Premises or any property now or formerly owned, operated
or leased by any Seller Entity or any of its Affiliates in connection with the
operation of the Business.
(f) All environmental audits or reports conducted in relation to the
Principal Premises or in connection with the operation of the Business thereat
(collectively, "Environmental Audits") which are in the possession or control of
Seller have been provided or made available to Buyer.
(g) To the knowledge of Seller, no Seller Entity nor any of its
subsidiaries or affiliates has retained or assumed, by contract, law or
otherwise, any liability or responsibility for any environmental claims or
conditions with respect to the Business or the Purchased Assets.
(h) For purposes of this Section 3.12, "Principal Premises" shall be
deemed to include the Principal Premises and any Purchased Assets located
thereat and includes all environmental media on which or in which the Principal
Premises are located.
3.13. NO UNDISCLOSED LIABILITIES. None of the Seller Entities (with
respect to the Businesses) has any liability or obligation of any nature,
whether due or to become due, absolute, contingent or otherwise, including
liabilities for or in respect of federal, state and local taxes and any interest
or penalties relating thereto, which has had or would reasonably be expected to
have a Material Adverse Effect, except (a) to the extent reflected as a
liability on the Combined Financial Statement as of May 26, 1996 included in the
Financial Statements, (b) liabilities incurred in the ordinary course of
business since May 26, 1996 and fully reflected as liabilities on the Business'
books of account, none of which, individually or in the aggregate, has been
materially adverse to the Business taken as a whole and (c) liabilities
disclosed on Schedule 3.13.
3.14. WARRANTY CLAIMS. The Seller Entities have paid (whether in
money, property or services) claims relating to breaches of express or implied
warranties (excluding claims founded upon negligence, strict liability in tort
or other similar legal theory) made with respect to Business Products for the
years ended May 26, 1996, May 28, 1995 and May 29, 1994 in amounts not in excess
of 2% of sales of the Business for such years, respectively. Except as
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set forth on Schedule 3.14, there are no pending or, to the knowledge of Seller,
threatened claims for the breach of any express or implied warranty made with
respect to Business Products, except for individual claims which involve claims
for money, property or services of less than $50,000.
3.15. INVENTORY; PURCHASED ASSETS. Except as set forth on Schedule
3.15:
(a) All Inventory is located at the locations specified on Schedule
2.1E and all such Inventory that is not located on the Principal Premises is
identified as belonging to the Business.
(b) The Purchased Assets, taken together with the Non-Assignable
Assets (the extent to which Buyer will receive the benefits thereof under
Section 2.6) and Buyer's rights under the Operating Agreements, constitute
substantially all of the assets, properties, agreements, licenses (other than
the Non-Assignable Patent Licenses), intellectual property and other rights
which are necessary to enable Buyer after the Closing to manufacture the
Business Products in a manner consistent with the Seller Entities' past
practice, furnish Business Services or otherwise operate the Business after the
Closing.
(c) No Seller Entity nor any of its subsidiaries has received any
written notice of any infringement or violation of, or conflict with, any
intellectual property rights of any third Person by the Seller Entities or any
of their subsidiaries in connection with the conduct of the Business which could
reasonably be expected to have a Material Adverse Effect.
3.16. REAL ESTATE.
(a) OWNED PROPERTY. (i) Schedule 2.1A sets forth a list of all of
the real estate owned by any one or more of the Seller Entities and primarily
used in the Business (such real estate, together with all beneficial,
appurtenant easements and other appurtenances thereto and with all fixtures
attached thereto or forming a part thereof, is collectively referred to herein
as the "Owned Real Estate"), and includes the street address and legal
description of each parcel of the Owned Real Estate. Seller has good, valid,
marketable and indefeasible fee simple title to the Owned Real Estate, including
the buildings, structures, fixtures and improvements situated thereon or forming
a part thereof and the appurtenances thereto, subject to the Permitted Fee Title
Exceptions. Seller has made available to Buyer copies of all (i) title reports,
title insurance policies and commitments therefore, (ii) surveys, (iii)
documents and instruments creating or governing appurtenances, and (iv)
licenses, certificates of occupancy, plans, specifications and permits,
pertaining to the Owned Real Estate that are in the possession or control of any
of the Seller Entities.
(ii) The Owned Real Estate is free and clear of all Encumbrances,
including, without limitation, security interests, any conditional sale or other
title or interest retention agreements or arrangements, options to purchase,
rights of first refusal, liens, encumbrances, mortgages, pledges, assessments,
easements, covenants, restrictions, reservations, defects in title,
encroachments and other burdens, leases, subleases, rights of occupancy, deed
restrictions, chattel mortgages and collateral security arrangements, rights of
way, building use restrictions, exceptions, variances or reservations of any
nature whatsoever, except for the
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following (collectively, "Permitted Fee Title Exceptions"): (a) any Encumbrances
or title defects, conditions, easements, covenants or restrictions, if any, none
of which, individually or in the aggregate, would reasonably be expected to have
a Material Real Estate Impairment or which would cause such Owned Real Estate to
be unmarketable or uninsurable at customary title insurance rates, (b) zoning or
land use ordinances (subject to the compliance obligations under Section 3.8 and
3.9), (c) liens for ad valorem real property taxes and assessments not yet due
and payable, (d) with respect to the Portland Facility only, the Shared
Facilities Agreement relating to such shared facility, and (e) with respect to
the Seller's facility in Santa Clara, California only, the Shared Services and
Occupancy Agreement relating to such shared facility. The Owned Real Estate is
also subject to those matters set forth on Schedule 2.1-A, but unless such
matters otherwise qualify under clauses (a) through (c) above, such matters
shall not be deemed to be Permitted Fee Title Exceptions.
(iii) No Seller Entity has received written notice from any
governmental authority, insurance company which has issued a policy with respect
to any of the Owned Real Estate or any board of fire underwriters or other body
performing similar functions or any other Person which (a) relates to or alleges
a violation of or nonconformity with any zoning, building, safety, subdivision,
wetlands or other similar law, code, rule, regulation, ordinance, permit,
license, certificate, covenant, restriction or condition with respect to any of
the Owned Real Estate or the use thereof which nonconformity could, either
individually or in the aggregate, reasonably be expected to have a Material Real
Estate Impairment, or (b) requests the performance of any repairs, alterations
or other work to or in any of the Owned Real Estate, which violations, repairs,
alterations or other work have not yet been cured or performed, as applicable;
which failure to perform such work, either individually or in the aggregate,
would reasonably be expected to have a Material Real Estate Impairment. There
is no pending condemnation, expropriation, eminent domain, or similar proceeding
affecting any of the Owned Real Estate and, to the knowledge of Seller, no such
action, proceeding or litigation is threatened which proceeding or litigation,
if concluded adversely to Seller Entities, would reasonably be expected to have
a Material Real Estate Impairment. The sale of the Owned Real Estate to Buyer
does not and will not violate or conflict with the requirements of any
subdivision plan currently applicable to the Owned Real Estate.
(b) REAL ESTATE LEASES. (i) Schedule 3.16 sets forth a list of all
of the leases or rights of occupancy pursuant to which the Seller Entities (or
any of them) lease or sublease any real property or interest therein related to
or used in the Business (collectively, as heretofore modified, amended or
extended, the "Leases"), including the identification of each of the lessors
thereof and the street addresses of all of the real estate demised under any of
the Leases (collectively, the "Leased Real Estate"). Except as set forth on
Schedule 3.16, one or more of the Seller Entities is the lessee under all
Leases, and no party other than one or more of the Seller Entities has any right
to possession, occupancy or use of any of the Leased Real Estate. Copies of (a)
leasehold title insurance policies and commitments therefor, title reports,
surveys, licenses, certificates of occupancy, plans, specifications, permits and
other documents, pertaining to the Leased Real Estate, if any, that are in the
possession or control of any of the Seller Entities, and (b) each of the Leases,
including all amendments, modifications and extensions, and together with all
subordination, non-disturbance and/or attornment agreements or any brokerage
commission agreements related thereto, and (c) any other material agreements
relating to the Leases have been made available by Seller to Buyer. Each of the
Leases is valid and in
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full force and effect and is binding and enforceable in accordance with its
terms. Except as set forth on Schedule 3.16-1, none of the Seller Entities has
received any written notice of any material default under any provision of any
of the Leases which default remains uncured. There is no material default by
any Seller Entity in the payment of rent under any Lease beyond any applicable
notice and cure period. None of the Seller Entities has given notice to any
other party to any of the Leases that such party is in default under any of the
provisions thereof which default remains uncured.
(ii) Except as set forth in Schedule 3.16, the Seller Entities
are in actual possession of the Leased Real Estate. The Seller Entities have
good and valid title to all the leasehold estates conveyed under the Leases free
and clear of all Encumbrances, including, without limitation, security
interests, any conditional sale or other title or interest retention agreements
or arrangements, options to purchase, rights of first refusal, liens,
encumbrances, mortgages, pledges, assessments, easements, covenants,
restrictions, reservations, defects in title, encroachments and other burdens,
leases, subleases, rights of occupancy, deed restrictions, chattel mortgages and
collateral security arrangements, rights of way, building use restrictions,
exceptions, variances or reservations of any nature whatsoever, except for the
following (collectively, "Permitted Leasehold Exceptions"): (a) zoning or land
use ordinances (subject to the compliance obligations under Sections 3.8 and
3.9), (b) liens for ad valorem real property taxes and assessments not yet due
and payable, (c) with respect to the Portland Facility only, the Shared
Facilities Agreement relating to such shared facility, (d) with respect to
Seller's Santa Clara, California facility only, the Shared Services and
Occupancy Agreement relating to such shared facility, and (e) any Encumbrances
or title defects, conditions, easements, covenants or restrictions effecting or
encumbering the fee interest of the Leased Real Estate, none of which, either
individually, or in the aggregate, would reasonably be expected to have a
Material Real Estate Impairment. The Leased Real Estate is also subject to
those matters set forth on Schedule 3.16, but unless such matters otherwise
qualify under clause (a), (b), and (e) above, such matters will not be deemed to
be Permitted Leasehold Exceptions.
(iii) No Seller Entity has received written notice from any
governmental authority, insurance company which has issued a policy with respect
to any of the Leased Real Estate or any board of fire underwriters or other body
performing similar functions or any other Person which (a) relates to or alleges
a violation of or nonconformity with any zoning, building, safety, subdivision,
wetlands or other similar law, code, rule, regulation, ordinance, permit,
license, certificate, covenant, restriction or condition with respect to any of
the Leased Real Estate or the use thereof which nonconformity could, either
individually or in the aggregate, reasonably be expected to have a Material Real
Estate Impairment, or (b) requests the performance of any material repairs,
alterations or other work to or in any of the Leased Real Estate, which
violations repairs, alterations or other work have not yet been cured or
performed, as applicable; which failure to perform such work, either
individually or in the aggregate, would reasonably be expected to have a
Material Real Estate Impairment. There is no pending condemnation,
expropriation, eminent domain, or similar proceeding affecting any of the Leased
Real Estate and, to the knowledge of Seller, no such action, proceeding or
litigation is threatened, which proceeding or litigation if concluded adversely
to the Seller Entities would reasonably be expected to have a Material Real
Estate Impairment.
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(iv) Except as set forth on Schedule 3.16, there are no brokerage
commissions or finder's fees due from any of the Seller Entities which are
currently due and unpaid with regard to any of the Leases or the Leased Real
Estate, or which will become due at any time in the future with regard to the
Leases or the Leased Real Estate.
(v) Except as set forth on Schedule 3.16, there have been no
casualties which could result in the termination by any landlord pursuant to the
terms of such lease, or pursuant to the written agreement of the landlord and
tenant.
3.17. OWNERSHIP OF SUBSIDIARIES. Except for the Fairchild
Subsidiaries, the Purchased Assets do not include the stock of, or any other
equity or debt interest in, any other corporation or business entity. Each
Fairchild Subsidiary is (or will be prior to Closing) a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, which jurisdiction is set forth opposite its name
on Schedule 3.17. Each Fairchild Subsidiary has (or will have prior to Closing)
all requisite power and authority to own or lease its properties and assets as
now owned or leased and to carry on its business as and where now being
conducted, except for any failure to have such power and authority which could
not reasonably be expected to have a Material Adverse Effect. The copies of the
articles of incorporation and bylaws, as amended to date, of each Fairchild
Subsidiary in existence as of the date hereof and which have been delivered to
Buyer, are correct and complete and are in full force and effect. The currently
authorized, issued and outstanding shares of capital stock of each Fairchild
Subsidiary in existence on the date hereof and the record holders as of the date
hereof of such shares are set forth on Schedule 3.17. All of such outstanding
shares have been (or will be prior to Closing) duly authorized, validly issued
and are fully paid and nonassessable, are directly or indirectly owned by Seller
free and clear of all liens, claims, security interests, pledges, charges,
equities, options, restrictions and encumbrances of whatsoever nature, were not
issued in violation of the terms of any agreement or other understanding binding
upon any Fairchild Subsidiary or Seller, and were issued in compliance with all
applicable federal and state securities or "blue sky" laws and regulations.
There are no outstanding options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the capital stock of any
Fairchild Subsidiary and no securities convertible into or exchangeable for any
of such capital stock.
3.18. TAX MATTERS. Except as set forth on Schedule 3.18 and except as
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect:
(a) The Seller Entities have (A) filed or provided all Returns
required to be filed or provided with respect or relating to, in connection with
or arising out of the Business and each Return is true, complete and accurate,
(B) timely paid all Taxes shown thereon as due and owing with respect or
relating to, in connection with or arising out of the Business, and (C) in
accordance with GAAP has provided for, on its books of account and related
records, liability for all other current Taxes not yet paid with respect to, or
in connection with or arising out of the Business. To Seller's knowledge, no
Seller Entity has received from any Governmental Authority any written notice of
proposed adjustment, deficiency or underpayment of Taxes with respect to, or in
connection with or arising out of the Business, which notice has not been
satisfied by payment or been withdrawn, and there are no claims that have been
asserted or threatened in writing relating to such Taxes against any Seller
Entity.
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(b) There are no liens with respect to Taxes upon the Purchased
Assets other than customary liens for current Taxes not yet due and payable.
(c) Each Fairchild Subsidiary has (A) duly filed or provided, or has
had filed or provided on its behalf, all Returns required to be filed by it, and
each such Return is true, complete and accurate; (B) paid, or has had paid on
its behalf, all Taxes shown to have become due pursuant to such Returns; and (C)
in accordance with GAAP has provided for, on its books of account and related
records, liability for all other current Taxes not yet paid.
(d) To the knowledge of Seller, there is no action, suit, proceeding
or claim currently pending regarding Taxes with respect to any Fairchild
Subsidiary. No Return of any Fairchild Subsidiary is being examined by, and no
written notification of intention to examine has been received from, any
Governmental Authority. No issue raised by any Governmental Authority in
connection with any Return with respect to Taxes of any Fairchild Subsidiary is
currently pending. No presently effective waiver or extension of any statute of
limitation with respect to Taxes has been given by or requested from any
Fairchild Subsidiary.
(e) There is no ruling issued to any Fairchild Subsidiary (or closing
agreement to which any Fairchild Subsidiary is a party) concerning Taxes from
(or with) any Governmental Authority which would have continuing material effect
on any Fairchild Subsidiary after the Closing Date.
(f) No Fairchild Subsidiary is a party to any tax sharing or similar
agreement in respect of Taxes of a Person other than a Fairchild Subsidiary.
(g) None of the Fairchild Subsidiaries has reported or expects to
report income, loss, deduction or credit in its capacity as a partner in another
entity for federal income tax purposes.
(h) Each Seller Entity is a United States person within the meaning
of Section 7701(a)(30) of the Code.
(i) There is no lien or security interest in favor of any
Governmental Authority on any of the assets of any Fairchild Subsidiary that
arose in connection with the failure (or alleged failure) to pay any Tax except
for customary liens for current Taxes not yet due and payable.
The representations and warranties set forth in this Section 3.18 are not
applicable to the extent that such Taxes do not constitute an encumbrance
against the Purchased Assets or will not become a liability of FSC Semiconductor
Corporation, Buyer or any of the Fairchild Subsidiaries.
3.19. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.19(a) lists all "employee
benefit plans," as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA) and all other
material pension, profit sharing, retirement, supplemental retirement, stock,
stock option, basic and supplemental accidental death and dismemberment, basic
and supplemental life and health insurance, post-retirement medical or life,
welfare, dental,
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vision, savings, bonus, deferred compensation, incentive compensation, business
travel and accident, holiday, vacation, severance pay, salary continuation, sick
pay, sick leave, short and long term disability, tuition refund, service award,
company car, scholarship, relocation, patent award, fringe benefit and other
employee benefit plans, arrangements, contracts, or policies, qualified or
unqualified, funded or unfunded, (i) maintained, contributed to, or required to
be contributed to by Seller or any ERISA Affiliate with respect to any Business
Employees, or (ii) pursuant to which Seller or any ERISA Affiliate may have any
liability with respect to any Business Employees, within the United States (the
"Benefit Plans").
(b) As applicable, with respect to each of the Benefit Plans, true
and complete copies of (i) all plan documents (including all amendments and
modifications thereof) and all related trust agreements and insurance contracts;
(ii) the last three filed Form 5500 series and all Schedules thereto, as
applicable; (iii) the current summary plan descriptions and all summary material
modifications thereto; and (iv) the most recent determination letter issued
with respect to each Benefit Plan has been delivered or made available to Buyer.
(c) Each Benefit Plan has been maintained, operated and administered
in compliance in all material respects with its terms and the applicable
provisions of ERISA and the Code.
(d) No Benefit Plan is subject to Title IV of ERISA.
(e) Seller's Retirement and Savings Program is the only Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA and which is intended to meet the qualification requirements of Section
401(a) of the Code (the "Pension Plan"). The Pension Plan meets the
qualification requirements of Section 401(a) of the Code and each related trust
is exempt from taxation under Section 501(a) of the Code.
(f) The Pension Plan has received a determination letter from the IRS
to the effect that such Pension Plan is qualified and all related trusts are
exempt from federal income taxes and no determination letter with respect to the
Pension Plan has been revoked nor has the Pension Plan been amended since the
date of its most recent determination letter in any respect which would
adversely affect its qualification.
(g) There are no pending audits or investigations by any governmental
agency involving the Benefit Plans, and no threatened or pending claims (except
for individual claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings involving any Benefit Plan.
(h) With respect to each Benefit Plan that is a "group health plan"
within the meaning of Section 607 of ERISA and that is subject to Section 4980B
of the Code, Seller and each ERISA Affiliate comply in all material respects
with the continuation coverage requirements of the Code and ERISA with respect
to Business Employees and their eligible beneficiaries and dependents.
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(i) Except as set forth in Schedule 3.19(i), no Benefit Plan provides
medical or life insurance benefits, beyond termination of service or retirement
other than coverage mandated by law.
(j) Except as set forth on Schedule 3.19(j), the execution of, and
performance of the transactions contemplated by this Agreement will not
constitute an event under any Benefit Plan that will result in any payment
(whether as severance pay or otherwise), acceleration, vesting or increase in
benefits with respect to any employee. No Benefit Plan provides for "parachute
payments" within the meaning of Section 280G of the Code.
(k) Schedule 3.19(k) lists all material pension, profit sharing,
retirement, supplemental retirement, stock, stock option, basic and supplemental
accidental death and dismemberment, basic and supplemental life and health
insurance, post-retirement medical or life, welfare, dental, vision, savings,
bonus, deferred compensation, incentive compensation, business travel and
accident, holiday, vacation, severance pay, salary continuation, sick pay, sick
leave, short and long term disability, tuition refund, service award, company
car, scholarship, relocation, patent award, fringe benefit and other employee
benefit plans, arrangements, contracts or policies, whether funded or unfunded
(i) maintained, contributed to, or required to be contributed to by Seller or
any Affiliate with respect to any Business Employees, or (ii) pursuant to which
Seller or any Affiliate may have any liability with respect to any Business
Employees, outside the United States (the "Foreign Plans"). Schedule 3.19(k)(i)
lists all the Foreign Plans that are not sponsored by a Fairchild Subsidiary (a
"Non-Subsidiary Foreign Plan").
(l) A true and complete copy of each Foreign Plan including all
amendments and modifications thereof together with all related trust agreements
and insurance contracts have been delivered or made available to Buyer.
(m) Except as set forth on Schedule 3.19(m), each Foreign Plan has
been maintained, operated and administered in compliance in all material
respects with its terms and with all applicable laws.
(n) All contributions and other payments required to be made by
Seller or any Affiliate to any Foreign Plan with respect to any period up to and
including the Closing Date shall have been made or accrued and booked on or
before the Closing Date.
(o) There are no pending audits or investigations by any governmental
or quasi-governmental agency involving the Foreign Plans and no threatened or
pending claims (except for individual claims for benefits payable in the normal
operation of the Foreign Plan), suits or proceedings involving any Foreign Plan.
3.20. No Implied Representation. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT BUYER AND SELLER
ACKNOWLEDGE AND AGREE THAT NONE OF SELLER OR ANY OF ITS AFFILIATES, AGENTS,
EMPLOYEES OR REPRESENTATIVES IS MAKING, WHETHER CONTAINED IN OR REFERRED TO IN
THE EVALUATION MATERIALS THAT HAVE BEEN OR SHALL HEREAFTER BE PROVIDED TO BUYER
OR ANY OF ITS
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AFFILIATES, AGENTS OR REPRESENTATIVES (INCLUDING WITHOUT LIMITATION THE
CONFIDENTIAL OFFERING MEMORANDA RELATING TO THE BUSINESS (THE "CONFIDENTIAL
OFFERING MEMORANDA") (SUCH MATERIALS COLLECTIVELY, THE "EVALUATION MATERIALS")),
ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, BEYOND THOSE
EXPRESSLY GIVEN BY SELLER IN THIS AGREEMENT, THE RECAP AGREEMENT AND THE
OPERATING AGREEMENTS, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR
REPRESENTATION AS TO THE VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY AS TO
ANY OF THE PROPERTIES OR ASSETS OF THE BUSINESS CARRIED OUT BY SELLER.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1. Organization and Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power and corporate authority to execute and deliver this
Agreement, the Purchase Price Note and the Operating Agreements and to effect
the transactions contemplated hereby and thereby and has duly authorized the
execution, delivery and performance of this Agreement, the Purchase Price Note
and the Operating Agreements by all necessary corporate action. Buyer has all
corporate power and corporate authority necessary to carry on its business as
now being conducted and to own or lease and operate its properties as and in the
places where such business is now conducted and such properties are now owned,
leased or operated.
4.2. Authorization; Binding Obligation. This Agreement, the Purchase Price
Note and the Operating Agreements have been duly executed and delivered by Buyer
and this Agreement, the Purchase Price Note and the Operating Agreements are the
valid and legally binding obligations of Buyer, enforceable against it in
accordance with their terms.
4.3. No Violations. (a) The execution, delivery and performance of this
Agreement, the Purchase Price Note and the Operating Agreements by Buyer and the
consummation of the transactions contemplated hereby and thereby do not and will
not (i) result in a breach or violation of any provision of Buyer's charter or
by-laws or in a material violation of any statute, rule, regulation or ordinance
applicable to Buyer or (ii) violate or result in a breach of or constitute an
event of default (or an event which might, upon the passage of time or the
giving of notice, or both, constitute an event of default) under any provision
of, result in acceleration or cancellation of any obligation under, or give rise
to a right by any party to terminate or amend its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien,
material lease, agreement, instrument, order, judgment, decree or other material
arrangement or commitment to which Buyer is a party or by which its assets or
properties are bound, or violate any order, judgment, decree, rule or regulation
of any court or any governmental agency or body having jurisdiction over Buyer
or any of its assets or properties.
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(b) No consent, approval, order or authorization of or registration,
declaration or filing with, any Person is required by Buyer in connection with
the execution and delivery of this Agreement, the Purchase Price Note, the
Operating Agreements or the consummation of the transactions contemplated hereby
or thereby, except for (i) any filings required to be made under the HSR Act,
and (ii) such consents, approvals, orders or authorizations, registrations,
declarations or filings where failure of compliance would not, individually or
in the aggregate, have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
4.4. Inspections; Limitation of Seller's Warranties. Buyer is an informed
and sophisticated participant in the transactions contemplated by this Agreement
and has undertaken such investigation, and has been provided with and has
evaluated certain documents and information in connection with the execution,
delivery and performance of this Agreement. Buyer acknowledges that it is
acquiring the Business without any representation or warranty, express or
implied, by Seller or any of its Affiliates except as expressly set forth
herein, in the Recap Agreement and in the Operating Agreements. In furtherance
of the foregoing, and not in limitation thereof, Buyer acknowledges that, except
as expressly set forth herein, in the Recap Agreement and in the Operating
Agreements, no representation or warranty, express or implied, of Seller or any
of its advisors, including, without limitation, Deutsche Morgan Grenfell, BA
Partners, Seller's lawyers (other than the opinions of such lawyers delivered in
connection with this Agreement), KPMG Peat Marwick (except in connection with
financial statements prepared by such accountants accompanied by an opinion of
such accountants thereon) or any of their respective Affiliates or
representatives, with respect to the Business (including, without limitation,
the Evaluation Materials, the Confidential Offering Memorandum, any other
information provided to Buyer pursuant to the Confidentiality Agreement and any
financial projection or forecast delivered to Buyer with respect to the revenues
or profitability which may arise from the Business either before or after the
Closing Date) shall form the basis of any claim against Seller or any of its
advisors, or any of their respective Affiliates or representatives, except as
otherwise provided in Section 3.20. With respect to any financial projection or
forecast delivered on behalf of Seller to Buyer, Buyer acknowledges that there
are uncertainties inherent in attempting to make such projections and forecasts
and that it is familiar with such uncertainties.
ARTICLE V
CERTAIN COVENANTS
5.1. Information. (a) Seller and Buyer will provide to each other and to
their respective officers, employees, counsel and other representatives, upon
request (subject to any limitations that are reasonably required to preserve any
applicable attorney-client privilege) reasonable access to their respective
officers and employees and reasonable access for inspection and copying of all
Business Records, Governmental Permits, Contracts and any other information
existing at the Closing Date and relating to the conduct of the Business, and
will make their respective officers and employees available, to the extent such
availability does not unreasonably interfere with the conduct of the Business by
Buyer, or the conduct of its business by Seller, as the case may be, as is
reasonably necessary to enable the party requesting such information to: (i)
comply with reporting, filing or other requirements related to the conduct of
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the Business and imposed on such party by any local, state or federal court,
agency or regulatory body or taxing authority; (ii) assert or defend any claims
or allegations in any arbitration or in any administrative or legal proceeding
related to the conduct of the Business other than claims or allegations which
one party to this Agreement has asserted against the other; or (iii) subject to
clause (ii) above, perform its obligations under this Agreement. Seller and
Buyer shall each maintain all of the foregoing information in accordance with
their normal document retention policies and if either party desires to destroy
or dispose of any of the foregoing which are material to the other party at any
time prior to the tenth anniversary of the Closing, such party will offer first
in writing at least 60 days prior to such destruction or disposition to
surrender them to the other party.
(b) Subject to applicable law, Seller agrees to make available to
Buyer, for inspection and copying by Buyer, all employment and personnel records
(including medical records) and information relating to any Business Employee
hired by Buyer.
(c) The party requesting the information and assistance provided in
clauses (a) and (b) of this Section 5.1 shall reimburse the other party for all
out-of-pocket costs and expenses incurred by such party in providing such
information and in rendering such assistance. The access to files, books and
records contemplated by this Section 5.1 shall be during normal business hours
and upon not less than two Business Days prior written request and shall be
subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein. Buyer agrees to preserve all Business Records and Governmental Permits
delivered to it by Seller for at least three (3) years after the Closing Date.
5.2. Tax Reporting and Allocation of Consideration. Buyer and Seller agree
that the sale of the Purchased Assets hereunder is a fully taxable sale for
income tax purposes. Seller further agrees that neither Buyer nor FSC
Semiconductor Corporation will be treated on Seller's federal income tax returns
(or amended federal income tax returns) as a member of any consolidated group of
which Seller is or was a member with respect to periods ending on or prior to
the Closing Date or beginning prior to and ending after the Closing Date. Buyer
and Seller recognize their mutual obligations pursuant to Section 1060 of the
Code to timely file IRS Form 8594 (the "Asset Acquisition Statement") with each
of their respective federal income tax returns. Accordingly, Buyer and Seller
agree to cooperate in the preparation of the Asset Acquisition Statement for
timely filing in each of their respective federal income tax returns in
accordance with a written statement (the "Statement of Allocation") prepared in
accordance with Schedule 5.2 (to be attached at Closing), setting forth an
allocation of the Purchase Price among such Purchased Assets and the covenants
not to compete and not to solicit contained in Section 5.6 in accordance with
the provisions of Section 1060 of the Code and the Treasury Regulations
thereunder. The Statement of Allocation shall be prepared by Seller. Seller
shall deliver, subject to Buyer's prior review and written approval the
Statement of Allocation to Buyer at the Closing. If Buyer approves the
Statement of Allocation, then, unless otherwise prohibited by law, all federal,
state and local income tax returns of Buyer and Seller shall be filed
consistently with the allocations made pursuant to the Statement of Allocation.
If Buyer does not approve the Statement of Allocation and if Buyer and Seller,
after good faith negotiations, cannot agree on the allocation of the
consideration among the Purchased Assets and covenants, then no Statement of
Allocation shall be prepared, and each party shall prepare and file its tax
returns
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in accordance with its own allocations. Seller and Buyer acknowledge and agree
that (x) Seller will be responsible for and perform all tax withholding, payment
and reporting duties with respect to any wages and other compensation paid by
Seller to any Business Employee in connection with the operation of the Business
prior to the Closing; and (y) Buyer will be responsible for and perform all tax
withholding, payment and reporting duties with respect to any wages and other
compensation paid by Buyer to any employee in connection with the operation of
the Business after the Closing. Seller and Buyer agree to follow the Standard
Procedure specified in Rev. Proc. 96-60, whereby, among other things, each will
be responsible for the reporting duties with respect to its own wages and
compensation to employees in connection with the operation of the Business.
5.3. Operating Agreements. On or prior to the Closing Date, Buyer shall
execute and deliver to Seller and Seller shall execute and deliver to Buyer the
following agreements (the "Operating Agreements"): Technology Licensing and
Transfer Agreement, Transition Services Agreement, Fairchild Foundry Services
Agreement, Revenue Side Letter, Fairchild Assembly Services Agreement, National
Foundry Services Agreement, National Assembly Services Agreement, Mil/Aero Wafer
and Services Agreement, Shared Facilities Agreement (for South Portland Site),
Shared Services Agreement (for South Portland Site) and Shared Services and
Occupancy Agreement and the agreements contemplated by the foregoing agreements.
5.4. Tax Matters.(a) Seller will be responsible for the preparation and
filing of (i) all Returns of any Fairchild Subsidiary that are due (giving
effect to valid extensions) on or before the Closing Date or are due after the
Closing Date for a taxable period that ends on or before the Closing Date and
(ii) all Returns for the Business that are due (giving effect to valid
extensions) after the Closing Date for all taxable periods ending on or before
the Closing Date. Seller shall make all payments required with respect to any
such Return as shown or required to be shown thereon; provided, however, Seller
and Buyer will reimburse each other for all Taxes prorated in accordance with
Section 5.4 (c).
(b) Buyer will be responsible for the preparation and filing of all
other Returns of any Fairchild Subsidiary or relating to the Business. Buyer
will make all payments required with respect to any such Return; provided,
however, Seller and Buyer will reimburse each other for all Taxes prorated in
accordance with Section 5.4 (c).
(c) Taxes imposed on a Fairchild Subsidiary for any taxable period
that begins before and ends after the Closing Date shall be allocated to and
paid or caused to be paid by (i) Seller for the period up to and including the
day before the Closing Date, and (ii) Buyer for the period beginning on the
Closing Date. For purposes of this Agreement, Taxes of any Fairchild Subsidiary
for the period up to and including the day before the Closing Date and for the
period beginning on the Closing Date shall be apportioned on a per diem basis in
the case of any such Taxes not measured or measurable in whole or in part with
reference to net or gross income, sales or receipts, capital expenses or
compensation expenses, and all other such Taxes shall be determined on the basis
of an interim closing of the books of the Fairchild Subsidiary as of the end of
the day before the Closing Date.
(d) Seller and Buyer shall provide reasonable cooperation and
information to each other in connection with (i) the preparation or filing of
any Return, amended Return, Tax
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election, Tax consent or certification, or any claim for a Tax refund, (ii) any
determination of liability for Taxes, and (iii) any audit, examination or other
proceeding in respect of Taxes related to any Fairchild Subsidiary or the
Business. Such cooperation shall include providing copies of all relevant
Returns, together with accompanying schedules and related work papers, documents
relating to determinations by any Governmental Authority and records containing
the ownership and tax basis of property, which either party may possess. Seller
and Buyer shall make available on a reasonable basis, employees of the Seller,
Buyer, or any Fairchild Subsidiary as the case may be, whose reasonable
out-of-pocket costs, if any, such as travel and lodging, shall be reimbursed by
the party to which such employees are made available. Seller and Buyer shall at
their own cost and expense preserve all Returns, schedules, workpapers and all
material records or other documents relating thereto until the expiration of any
applicable statute of limitations, including extensions thereof, provided that
notice of such extension is given to the party which did not grant the
extension. Seller and Buyer shall not destroy or otherwise dispose of any
Returns, schedules, workpapers, information, records and documents without first
providing the other party a reasonable opportunity to review and copy the same.
The party requesting such information, records and documents shall bear the
reasonable out-of-pocket costs and expenses incurred in connection with
providing the same. For the Seller's fiscal year ending May 25, 1997, Buyer
shall at its own cost and expense complete and submit any Tax data packages
required by Seller consistent with past practices of Seller's Tax Department.
Any information obtained under this Section 5.4 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Returns,
claims for a Tax refund or in conducting any audit, examination or other
proceeding in respect of Taxes.
(e) Seller shall have the right, at its own expense, to control any
audit or examination by any Governmental Authority, to initiate any claim for
refund, to amend any Return, or to contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any Taxes for any taxable period ending on or before the Closing
Date, except that Seller shall consult with Buyer and obtain Buyer's consent
(which consent shall not be unreasonably withheld) as to any of the foregoing if
Buyer, any of its Subsidiaries or any Fairchild Subsidiary may be adversely
affected by such action. Buyer shall promptly notify Seller of the receipt of
all notices, audits, examinations or other proceedings, information or document
requests, requests for conferences, meetings, interviews or testimony of
employees of Buyer or any Fairchild Subsidiary and other correspondence in
respect of Taxes related to any Fairchild Subsidiary or the Business for any
taxable period ending on or before the Closing Date. Seller shall have the
right, at its own expense to participate in all conferences, meetings,
interviews or testimony of employees of Buyer or any Fairchild Subsidiary and
other correspondence in respect of Taxes related to any Fairchild Subsidiary or
the Business for any taxable period ending on or before the Closing Date. With
respect to any audit or other proceeding relating to Taxes for taxable periods
that begin before and end after the Closing Date ("Straddle Period Taxes"),
Seller shall have the right, at its own expense, to participate (i) in all
conferences, meetings or proceedings with any Governmental Authority, the
subject matter of which is or includes Straddle Period Taxes and (ii) in all
appearances before any court, the subject matter of which is or includes
Straddle Period Taxes. Buyer agrees not to settle or compromise any issue
relating to Straddle Period Taxes without Seller's consent (which consent shall
not be unreasonably withheld) unless Buyer first waives, in writing, any rights
to indemnification it may have under this Agreement relating to such Straddle
Period Taxes.
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(f) Effective as of the Closing Date, Seller shall cause any tax
sharing agreements to which any Fairchild Subsidiary is a party to be terminated
as to such Fairchild Subsidiary and such Fairchild Subsidiary shall have no
current or continuing obligations under any such agreement after the Closing
Date.
5.5. Employee Matters. (a) Effective as of the Closing Date, except for
the Fab Employees, Buyer shall offer to employ all of the Business Employees who
are not otherwise employed by a Fairchild Subsidiary on substantially the same
terms and conditions (other than the Benefit Plans set forth on item (c) of
Schedule 3.5) as they were employed immediately before the Closing Date;
provided, that such offer of employment with respect to any Business Employee
who is on Medical Leave as of the Closing Date shall only be effective if and
when such Business Employee is ready, willing and able to return to active duty
and provided further, that notwithstanding Buyer's offer of employment,
responsibility for the workers' compensation benefits of any Business Employee
shall be governed by Section 5.5(j). In addition, Buyer shall offer to employ
the Fab Employees in accordance with the terms and conditions set forth on
Schedule 5.5A. All of the Business Employees who accept such offers of
employment are hereinafter referred to as "Transferred Employees" and shall be
considered to become "Transferred Employees" as of the Closing Date, except for
such Business Employees who are on Medical Leave or classified as a Fab Employee
as of the Closing Date, each of whom shall be considered to become a
"Transferred Employee" as of the date he or she returns to active duty with the
Buyer after the Closing Date. Nothing in this Section 5.5 shall limit Buyer's
authority to terminate the employment of any Business Employee at any time after
he or she becomes a Transferred Employee for any reason.
(b) Effective as of the Closing Date, Buyer shall take, or cause to
be taken, all action necessary and appropriate to establish employee benefit
plans for the benefit of Transferred Employees and their eligible beneficiaries
and dependents that correspond to, and that are substantially similar in the
aggregate (excluding equity based features and the Benefit Plans set forth on
item (c) of Schedule 3.5) to Seller's Benefit Plans and Non-Subsidiary Foreign
Plans set forth on Schedule 3.19(a) and Schedule 3.19(k)(i) (such plans
established by Buyer are hereinafter referred to as "Buyer's Plans"). Except as
specifically provided otherwise in this Section 5.5 or as required by law, each
Transferred Employee and his or her eligible beneficiaries and dependents shall
cease to participate in and accrue benefits under Seller's Benefit Plans and
Non-Subsidiary Foreign Plans, and shall become eligible to participate in and
accrue benefits under Buyer's Plans, as of the date such Transferred Employee
becomes a Transferred Employee. Except as specifically provided otherwise in
this Section 5.5, Seller shall remain responsible for all liabilities or
obligations of any Seller Entity or Affiliate to the Business Employees or any
of their other present or former employees (or the Beneficiary of any such
individual) arising out of their employment relationship with any Seller Entity
or any Affiliate, including without limitation, claims asserted under any
Benefit Plan, Non-Subsidiary Foreign Plan or collective bargaining agreement or
claims for severance, bonuses or any other benefits that must be paid as a
result of the transactions contemplated by this Agreement (whether or not such
individual becomes a Transferred Employee) or as a result of the termination of
such employees by any Seller Entity, including severance, bonuses or any other
benefits arising under the agreements with directors, officers and employees set
forth on Schedule 3.5 other than claims resulting from or arising out of a
failure of Buyer to comply with its obligations under this Section 3.5 other
than claims resulting from or arising out of a failure
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of Buyer to comply with its obligations under this Section 5.5. Buyer shall be
responsible for all liabilities relating to or arising out of Buyer's Plans.
Nothing in this Section 5.5 shall prevent Buyer from amending, modifying or
terminating any of Buyer's Plans at any time after the Closing Date or prevent
Seller from amending, modifying or terminating any of Seller's Benefit Plans and
Non-Subsidiary Foreign Plans at any time after the date hereof; provided, if
Seller makes any amendment or modification to a Seller's Benefit Plan or
Non-Subsidiary Foreign Plan after the date hereof that increases materially the
costs of providing benefits thereunder to any Business Employee, the
corresponding Buyer's Plan need not incorporate such amendment or modification.
Notwithstanding the foregoing sentence, Buyer's Plans shall at all times after
the Closing Date treat pre-Closing service by Transferred Employees with Seller
and its affiliates in the same manner as service with Buyer for all purposes
under Buyer's Plans other than accrual of benefits.
(c) Seller's Benefit Plans and Non-Subsidiary Foreign Plans that are
identified on Schedule 3.19(a) or Schedule 3.19(k)(i) as Medical Plans, Dental
Plans and other Welfare Benefit Plans shall be responsible for all claims
incurred by any Transferred Employee and any eligible beneficiary or dependent
thereof before the date such Transferred Employee becomes a Transferred Employee
(regardless of when submitted), and the corresponding Buyer's Plans shall be
responsible for all claims incurred by any Transferred Employee and any eligible
beneficiary or dependent thereof on or after the date such Transferred Employee
becomes a Transferred Employee. Such Buyer's Plans shall provide coverage to
Transferred Employees and their eligible beneficiaries and dependents without
regard to any pre-existing conditions except to the extent such pre-existing
conditions were subject to coverage limitations under the corresponding Seller's
Benefit Plans or Non-Subsidiary Foreign Plans, and shall give credit for all
deductibles, copayments and other out-of-pocket expenses incurred by Transferred
Employees under Seller's Benefit Plans and Non-Subsidiary Foreign Plans during
the portion of the applicable plan year that precedes the date such Transferred
Employees begin to be covered by the corresponding Buyer's Plans. An individual
receiving benefits under Seller's Benefit Plans pursuant to the continuation
coverage requirements of Section 601 et seq. of ERISA and section 4980B of the
Code as a result of ceasing to be an eligible beneficiary or dependent of a
Transferred Employee shall be considered for all purposes of this Section 5.5 to
be an eligible beneficiary or dependent, as applicable, of such Transferred
Employee during the period such continuation coverage is required to be
provided. It is understood that a claim for a benefit under any such plan shall
be deemed to be incurred (i) in the case of a claim for life insurance or other
death benefits, on the date of death, (ii) in the case of a claim for disability
benefits, on the date the later of the date the relevant disability status is
deemed to begin and the date any applicable waiting period is satisfied, (iii)
in the case of a claim for medical, dental, vision care, employee assistance,
family care and other benefits involving the rendering of services or the
reimbursement of the cost of services, on the date the relevant service is
rendered, and (iv) in the case of a claim for prescription drug benefits, on the
date the relevant prescription is filled.
(d) Notwithstanding the provisions of Sections 5.5(b) and (c), if
Buyer determines that it is not practicable for it to establish any of the
Buyer's Plans corresponding to the Seller's Benefit Plans set forth on Schedule
5.5D as of the Closing Date, Seller shall amend such corresponding Seller's
Benefit Plan so as to permit the continued participation of Transferred
Employees therein until Buyer is able to establish such Buyer's Plan (and Buyer
shall do so as soon as reasonably practicable after the Closing Date).
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(e) (i) Effective as of the Closing Date, Buyer shall establish a
defined contribution retirement plan qualified under section 401(a) of the Code
for the benefit of Transferred Employees located in the United States ("Buyer's
Savings Plan"). Seller shall take all actions necessary or appropriate so that,
effective as of the date any participant in Seller's Retirement and Savings
Program (the "RASP") becomes a Transferred Employee, such participant shall be
fully vested in his or her accrued benefit under the RASP. Seller agrees, as
soon as practicable following the Closing Date, to direct the trustee of the
trust funding the RASP to transfer to the trustee of the trust funding the
Buyer's Savings Plan in one or more separate transfers, the account balances as
of the date of transfer attributable to the participants in the RASP who are
Transferred Employees, plus the portion of any unallocated contributions and
trust earnings attributable to such participants who are Transferred Employees.
Unless otherwise agreed to by Buyer and Seller, such account balances shall be
transferred in cash (except to the extent such account balances are invested in
participant notes which shall be transferred in kind); provided, that with
respect to any portion of such accounts invested in Insurance Policy #61896
issued by Confederation Life Insurance Company, Seller shall transfer such
amounts in kind or in cash, as and when reasonably practicable and prudent.
Following the transfer to Buyer's Savings Plan of the account balances as
provided herein, Buyer's Savings Plan shall be solely liable, to the extent of
the account balances transferred and any benefits accruing thereafter, for the
payment of benefits to the Transferred Employees whose accounts were so
transferred.
(ii) Seller and Buyer shall, in connection with the transfers
required by this Section 5.5(e), cooperate in making any and all appropriate
filings required under the Code or ERISA, and the regulations thereunder, and
any applicable securities laws, and shall take all such action as may be
necessary and appropriate to cause such transfers to take place as soon as
practicable after the Closing Date; provided, however, that no such transfer
shall take place until after the later of (i) the expiration of a 30-day period
following the date of filing of any required Form 5310 (or any successor form
thereto) with the IRS and (ii) the earlier of (a) the receipt of a favorable IRS
determination letter with respect to the qualification of the Buyer's Savings
Plan under Section 401(a) of the Code or (b) the receipt by Seller of an opinion
of Buyer's counsel to the effect that Buyer's Savings Plan is intended in good
faith to be qualified under Section 401(a) of the Code and that an application
for an IRS determination letter to that effect has been filed within the
remedial amendment period.
(iii) Seller shall be responsible for making all matching
contributions applicable to all employee contributions made to the RASP by
Transferred Employees prior to Closing. Such contribution shall be made prior
to the time of the asset transfers required by Section 5.5(e)(i). Seller will
be responsible for making a "Pro Rata Profit Sharing Contribution" (as described
below) to the RASP on behalf of the Transferred Employees prior to the time of
the asset transfers required by Section 5.5(e)(i). The Pro Rata Profit Sharing
Contribution shall mean a good faith estimate of the amount to be contributed
under the profit-sharing contribution formula utilized under the RASP for the
plan year that begins before and ends after the Closing Date but applied only to
the compensation earned by the Transferred Employees from the Seller during such
plan year.
(f) Except as otherwise expressly set forth in this subsection (f),
Buyer shall be responsible for paying awards to Transferred Employee under the
Seller's Key Employee
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Incentive Plan ("KEIP") for the fiscal year of Seller that begins before and
ends after the Closing Date (the "Overlapping Fiscal Year"), including, without
limitation, those liabilities set forth on Schedule 1-A/1-B under the heading
"Assumed by FSC." Buyer shall pay such amounts in accordance with the terms of
the KEIP, except that (i) employment with Buyer shall be treated as employment
with Seller for purposes of determining eligibility to receive an award under
the KEIP, and (ii) the amount of each such award shall be determined by (A)
multiplying the Performance Factor (as defined below) times the applicable
Transferred Employee's Annual Compensation (as defined below) times the
applicable Transferred Employee's Participation Percentage (as defined in the
KEIP), and then (B) multiplying the result of (A) by a fraction, the numerator
of which is the number of days during the Overlapping Fiscal Year that precede
the Closing Date, and the denominator of which is the total number of days
during the Overlapping Fiscal Year. For purposes of this Section 5.5(f):
"Performance Factor" means the actual performance with respect to the
performance goals under the KEIP for the Overlapping Fiscal Year, measured by
reference solely to performance during the portion of the Overlapping Fiscal
Year that precedes the Closing Date, as reasonably determined by Buyer; and a
Transferred Employee's "Annual Compensation" means such Transferred Employee's
Compensation (as defined in the KEIP) treating compensation from Buyer after the
Closing Date as if it were compensation from Seller. The KEIP awards payable
pursuant to this Section 5.5(f) shall be paid following the end of the
Overlapping Fiscal Year in accordance with past practice (but in no event more
than 45 days after the end of the Overlapping Fiscal Year). Seller shall be
responsible for paying all awards to Transferred Employees under Seller's KEIP
to the extent such awards were awarded with respect to a fiscal year prior to
the Overlapping Fiscal Year and have been deferred by the applicable recipient,
including, without limitation, those liabilities set forth on Schedule 1-A/1-B
under the heading "Stay with NSC."
(g) Seller shall remain responsible for providing scholarship
benefits to any child of a Transferred Employee who is receiving such benefits
as of the date such individual becomes a Transferred Employee.
(h) Buyer shall permit Transferred Employees to use after the Closing
Date all vacation that is accrued but unused as of the Closing Date under
Seller's vacation pay policies and practices. As soon as practicable following
the Closing, Seller shall provide Buyer with a list of the amount of each
Transferred Employee's accrued vacation as of the Closing Date.
(i) Buyer shall be responsible for paying awards for Seller's third
and fourth fiscal quarters for the fiscal year ending May 25, 1997 under
Seller's Success Sharing Plan to all eligible Transferred Employees in
accordance with the terms of such Plan. Seller shall be responsible for paying
awards under Seller's Success Sharing Plan to all eligible employees, other than
Transferred Employees, including, without limitation, those awards set forth on
Schedule 1-A/1-B under the heading "Stay with NSC." Seller shall pay all sales
incentive compensation earned by any Transferred Employee before he or she
becomes a Transferred Employee, as determined in accordance with the terms of
the applicable sales incentive plan of Seller. Stock options granted under
Seller's Stock Option Plan ("Seller's Stock Plan") to any Transferred Employee
at least six months before, and that remain outstanding and unexercised as of,
the date he or she becomes a Transferred Employee shall be fully vested and
exercisable as of such date and shall remain exercisable until, and shall
terminate upon, the close of business on the ninetieth day following such date,
all in accordance with the terms of Seller's Stock Plan.
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(j) Buyer shall be responsible for any workers' compensation claims
incurred by any Transferred Employee whether incurred prior to, upon or after
Closing. A workers' compensation claim shall be considered "incurred" on the
first date that there is objective evidence of the event or condition that is
the basis of such claim.
(k) Seller and Buyer will take all action necessary to facilitate the
treatment as deferred compensation for income tax purposes of all KEIP payments
previously deferred that otherwise would have become payable prior to the
Seller's 1997 fiscal year, KEIP awards otherwise payable for the Overlapping
Fiscal Year, certain stay-on bonuses, sales bonuses, participation in sales
price pools, management incentive bonuses, retention bonus plan payments, and
enhanced benefits under performance incentive plans which come due to be paid or
delivered by any Seller Entity to certain Transferred Employees previously
identified to National Semiconductor, with each such Transferred Employee to be
entitled to designate the amount of such payments to which he or she is entitled
to be so treated and to designate the manner in which such payments shall be
made in order to achieve such treatment. As of the Closing Date, Buyer shall
assume all liabilities of Seller with respect to such designated payments, and
Buyer and Seller shall use their best efforts to cause such Transferred
Employees to consent to such assumption and release Seller from such
liabilities. Buyer shall establish one or more "rabbi" trusts to provide for
payment of such liabilities and each such trust shall allow the investment of
its assets in stock of Buyer or any of its Affiliates or designees. As promptly
as practicable on or after Closing, Seller shall contribute to such trust or
trusts a cash amount equal to the amount of such assumed liabilities as of the
Closing Date. In the event that Seller shall pay any awards to Transferred
Employees under Seller's KEIP with respect to the Overlapping Fiscal Year, Buyer
shall reimburse Seller for such payments. Seller and Buyer agree that Seller
shall be entitled to any and all tax deductions attributable to satisfaction of
such assumed liabilities, Buyer shall be entitled to any and all tax deductions
attributable to satisfaction by Buyer of any other liabilities relating to such
deferred compensation, that they will cooperate with one another in sharing any
information needed to assure the foregoing, and that neither of them shall take
any position on any tax return or take any other action inconsistent with the
foregoing.
(l) Notwithstanding the foregoing, to the extent required by
applicable law, effective as of the Closing Date, Buyer shall assume all
liabilities arising under German pension plan identified on Schedule 3.19(K)
with respect to Transferred Employees.
(m) Effective as of the Closing Date, all Transferred Employees shall
cease to participate in the National Stock Purchase Plan and Seller shall cause
all employee contributions not utilized to purchase National stock prior to the
Closing Date to be refunded to Transferred Employees within 30 days.
5.6. Covenant Not to Compete; Nonsolicitation. (a) From and after the
Closing Date, Seller will not and will cause its Affiliates not to, for its own
account or for the account of others, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of any business conducting business under the name "Fairchild," or any
variant thereof, other than Fairchild Parent and its Affiliates. For a period
of five years from and after the Closing Date, Seller will not and will cause
its Affiliates (other than natural persons) not to, other than in the
performance of Seller's obligations under the Operating Agreements, for its own
account or for the account of others, directly or indirectly
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(i) engage in any Competing Business, or (ii) own, manage, operate, join,
control or participate in the ownership, management, operation or control of any
person or entity who or which at any relevant time during such period is engaged
in any Competing Business. Ownership of not more than 5% of the outstanding
capital stock of any company registered under Section 12 of the Securities
Exchange Act of 1934 shall not be a violation of this Section 5.6(a).
Notwithstanding the foregoing, in the event that Buyer breaches any of the
Fairchild Foundry Services Agreement, Fairchild Assembly Services Agreement, or
Mil/Aero Wafer Services Agreement included in the Operating Agreements, which
breach gives rise to a right of termination of such agreement, Seller may
manufacture or assemble the products or perform the services which Buyer is not
providing under such agreement as a result of such breach, solely to satisfy its
own needs for such products or services and not for the purpose of providing
such products or services to others.
(b) As used herein, "Competing Business" shall mean the design,
production, manufacture, assembly, testing, distribution, marketing or sale for
Seller's own account or for the account of others of any product that has
substantially the same specifications as any Business Product or the purchase
for resale or repackaging of any Business Product except pursuant to the
Mil/Aero Wafer Services Agreement of even date herewith between Buyer and
Seller.
(c) For a period of one year from and after the Closing Date, Seller
will not and will cause its Affiliates not to, directly or indirectly, solicit
or attempt to solicit any person or entity who is or has been a customer,
supplier, licensor, licensee or business relation of the Business prior to or
during such period to cease its particular business relationship with the
Business.
(d) Except as specifically contemplated in Section 5.5, for a period
of two years from the Closing Date with respect to any director, officer,
employee or agent located in Maine and for a period of one year from and after
the Closing Date with respect to any of the foregoing located outside of Maine,
neither party hereto will, and the parties hereto will cause their respective
Affiliates not to, directly or indirectly, solicit or induce any person or
entity who is a director, officer, employee or agent of the other party or any
of its Affiliates to terminate his, her or its relationship with, or employment
by, such entity.
(e) Notwithstanding the foregoing, Seller may acquire any business or
entity that engages in a Competing Business (an "Acquired Business") provided
that (i) not more than fifteen percent (15%) of the revenues of the Acquired
Business during the twelve calendar months immediately preceding such
acquisition are derived from any Competing Business and (ii) Seller uses its
diligent good faith efforts to dispose of the portion of the Acquired Business
which engages in a Competing Business (the "Competitive Portion") as soon as
commercially practicable.
(f) For a period of thirty-nine (39) months following Closing, Buyer
will not develop, manufacture (except for Seller under the Fairchild Foundry
Services Agreement or Fairchild Assembly Services Agreement each of even date
herewith between Buyer and Seller), market or sell any integrated circuit that
has substantially the same specifications as any of Seller's integrated circuit
products identified in Schedule 5.6 hereto; provided, however, that this
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provision shall not prohibit Buyer from acquiring and operating any Person that
at the time of acquisition develops, manufactures, markets or sells any product
that has substantially the same specifications as any of Seller's products
identified on Schedule 5.6.
(g) The restrictive covenants contained in this Section are covenants
independent of any other provision of this Agreement and the existence of any
claim which any party to this Agreement may allege against any other party to
this Agreement, whether based on this Agreement or otherwise, shall not prevent
the enforcement of these covenants. Each of Seller and Buyer agrees that the
other's remedies at law for any breach or threat of breach of the provisions of
this Section will be inadequate, and that each party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Section
and to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which such party may be entitled at law or equity. In the event
of litigation regarding the covenant not to compete, the prevailing party in
such litigation shall, in addition to any other remedies the prevailing party
may obtain in such litigation, be entitled to recover from the other party its
reasonable legal fees and out of pocket costs incurred by such party in
enforcing or defending its rights hereunder. The length of time for which this
covenant not to compete shall be in force shall not include any period of
violation or any other period required for litigation during which the party
seeking to enforce this covenant seeks to enforce this covenant. Should any
provisions of this Section be adjudged to any extent invalid by any competent
tribunal, such provision will be deemed modified to the extent necessary to make
it enforceable.
5.7. Material Consents. Seller and Buyer agree to use their respective
Best Efforts to obtain prior to the Closing all of the consents of third Persons
which have been disclosed, or are required to be disclosed, on Schedule 3.3,
which consents shall be in a form reasonably satisfactory to Seller and Buyer.
5.8. Notice to Customers. Seller agrees, in consultation with Buyer, to
promptly notify customers of the Business of the consummation of the
transactions contemplated by this Agreement and to reasonably assist Buyer, at
Buyer's expense, in making arrangements with such customers for the payment of
Buyer's accounts receivable (other than the Accounts Receivable) in a manner
satisfactory to Buyer.
5.9. Confidentiality. For a period of five years after the Closing Date,
Seller agrees that it will keep confidential all of Buyer's Proprietary
Information and Buyer agrees that it will keep confidential all of Seller's
Proprietary Information except that Buyer shall not be required to keep
confidential Proprietary Information relating to the Business and conveyed to
Buyer as part of the Purchased Assets; such Proprietary Information shall
include any Proprietary Information obtained in connection with the Operating
Agreements. The obligation of each party to keep such Proprietary Information
confidential shall not apply to any information which (i) is or becomes
available to such party from a source other than the other party (or any Person
who is bound by a confidentiality agreement with such other party with respect
to such information), (ii) is or becomes available to the public other than as a
result of disclosure by such party or its agents, or (iii) is required to be
disclosed under applicable law or judicial process; provided, however, that if a
party is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demand or similar process) to disclose any of such information, to
the extent permitted by law,
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such party will provide the other party with prompt written notice to, and will
cooperate with, such other party so that such other party may seek a protective
order or other appropriate remedy; provided, further, that in the event such
other party waives compliance with the provisions of this Section 5.9, such
party shall disclose only that portion of the confidential information which is
legally required and will exercise its Best Efforts to seek confidential
treatment for such information. Notwithstanding anything in this Section 5.9 to
the contrary, in the event that any such information is also subject to a
limitation on disclosure or use contained in another written agreement between
Buyer and Seller which is more restrictive than the limitation contained in this
Section 5.9, then the limitation in such agreement shall supersede this Section
5.9.
5.10. Estoppel Certificates. The parties shall each use, and Seller
shall cause the Seller Entities to use, their respective Best Efforts to obtain
on or prior to the Closing estoppel certificates and lessor lien waivers (such
estoppel certificates and waivers not to be conditioned on any increased rental,
other payment, reduced term, or other change of lease terms), if applicable, in
a form and substance reasonably acceptable to Buyer and its lenders and dated a
date occurring not more than twenty (20) days prior to the Closing Date (the
"Estoppel Certificates"), from each real property lessor listed on Schedule
3.16.
5.11. Title Policies. The parties shall each use, and Seller shall
cause the Seller Entities to use, their respective Best Efforts to obtain on or
prior to the Closing, at standard rates, good and valid, irrevocable ALTA
extended form title insurance policies (or signed pro forma policies)
(collectively, the "Title Policies" issued by a nationally recognized title
company or companies reasonably acceptable to Buyer (collectively, the "Title
Company"), insuring (or committing the Title Company to insuring) the Buyer's
fee title to each parcel of the Owned Real Estate in such amounts which are
equal to the current fair market values of each of such parcels, subject to no
Encumbrances or exceptions to title other than the than the Permitted Fee Title
Exceptions, together with such endorsements as are customary for commercial
transactions of this type including without limitation a comprehensive
endorsement with respect to easements and restrictions of record. Each of the
Title Policies shall be effective as of the date and time of the recording of
the deed to the parcel or parcels of the Owned Real Estate to which it relates.
The cost of obtaining such Title Policies shall be paid one-half by Seller and
one-half by Buyer.
5.12. Survey. The parties shall each use, and Seller shall cause the
Seller Entities to use, their respective Best Efforts to obtain no later than
fifteen days prior to Closing, as-built surveys of each parcel of the Owned Real
Estate (the "Surveys") prepared by surveyors registered in the jurisdiction in
which the surveyed property is located and otherwise satisfactory to Buyer (the
"Surveyor") in accordance with the 1992 minimum standard detail requirements for
ALTA/ACSM surveys, Class A or B or Urban, dated as of a date after January 20,
1997 showing, with respect to each parcel of the Owned Real Estate and the
appurtenances to such parcel, access to and from a dedicated and accepted public
right-of-way, the correct location and dimensions of all improvements (including
fences and driveways), all easements, rights-of-way and setback lines, the
correct location and dimensions of all alleys and streets, all other matters of
record or visible on the ground affecting such parcel of the Owned Real Estate,
and such other information as may be requested by Buyer. The Surveys shall: (i)
show that other than Permitted Fee Title Encumbrances, all structures and other
improvements on the Principal
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Premises are (I) within the lot lines and do not encroach upon the properties of
any other Person, and (II) in compliance with applicable zoning laws relating to
setback and height restrictions, (ii) show no Encumbrances other than Permitted
Fee Title Encumbrances, (iii) be certified to the Buyer and its assigns, the
Investor and any mortgage lender to the same, and the Title Company, and (iv)
comply with any requirements imposed by the Title Company as a condition to the
removal of any survey exception from the general exceptions to the Title Policy
covering such of the Owned Real Estate as is shown on the property surveyed.
The cost of obtaining such Surveys shall be paid one-half by Seller and one-half
by Buyer.
5.13. Accounts Receivable and Related Claims. From and after the
Closing, Buyer (i) shall use its Best Efforts to assist Seller, upon Seller's
reasonable request, in collecting the Accounts Receivable and (ii) shall not
(A) without the prior written consent of Seller, waive or settle any claims or
rights which constitute Excluded Assets, including, without limitation, claims
with respect to Accounts Receivable or (B) take any action to interfere with or
impair the collection by Seller of any claims or rights which constitute
Excluded Assets, including, without limitation, claims with respect to Accounts
Receivable.
ARTICLE VI
CLOSING
6.1. Seller's Closing Deliveries. On the Closing Date, Seller shall
deliver, or execute and deliver, to Buyer:
(a) the Operating Agreements;
(b) an Assumption Agreement and Bill of Sale substantially in the
form set forth in Exhibit 6.1 (the "Bill of Sale") with respect to the Purchased
Assets (other than the Non-Assignable Assets);
(c) special warranty deeds in the customary and proper form for
recording duly executed and acknowledged so as to convey to Buyer good and
marketable title to the Principal Premises free and clear of all Encumbrances
other than Permitted Fee Title Exceptions;
(d) all of the consents of third Persons described on Schedule 7.5 of
the Recap Agreement; and
(e) any documents or instruments as Buyer may reasonably request or
as may be otherwise necessary or desirable to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets (other
than the Non-Assignable Assets) to Buyer and to put Buyer in actual possession
or control of the Purchased Assets (other than the Non-Assignable Assets).
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6.2. Buyer's Closing Deliveries. On the Closing Date, Buyer shall deliver,
or execute and deliver, to Seller:
(a) the Operating Agreements;
(b) the Assumption Agreement;
(c) the Bill of Sale;
(d) the Purchase Price Note;
(e) a certificate for 100 shares of Buyer's Common Stock; and
(f) any documents or instruments as Seller may reasonably request or
as may be otherwise necessary or desirable to evidence and effect the assumption
by Buyer of the Assumed Liabilities.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification By Seller. Seller hereby agrees to indemnify and hold
harmless Buyer from and against any Damages arising out of or resulting from (i)
the Excluded Liabilities or (ii) the breach by Seller of any covenant contained
in this Agreement or in any Operating Agreement.
7.2. Indemnification by Buyer. Buyer hereby agrees to indemnify and hold
harmless Seller from and against any Damages arising out of or resulting from
(i) the Assumed Liabilities or (ii) the breach by Buyer of any covenant
contained in this Agreement or in any Operating Agreement.
7.3. General Indemnification Procedures.
(a) In the event that any party incurs or suffers any Damages with
respect to which indemnification may be sought by such party pursuant to this
Article VII, the party seeking indemnification (the "Indemnitee") must assert
the claim by giving written notice (a "Claim Notice") to the party from whom
indemnification is sought (the "Indemnitor"). The Claim Notice must state the
nature, basis and amount (if known) of the claim in reasonable detail based on
the information available to the Indemnitee and, if the Claim Notice is being
given with respect to a third party claim, it must be accompanied by a copy of
any written notice of the third party claimant. If the Claim Notice is being
given by reason of any third party claim, it shall be given in a timely manner
but in no event more than 30 days after the filing or other written assertion of
any such claim against the Indemnitee, but the failure of the Indemnitee to give
the Claim Notice within such time period shall not relieve the Indemnitor of any
liability for indemnification under this Article VII, except to the extent that
the Indemnitor is prejudiced thereby. If the amount of the claim is not known
at the time the Claim Notice is given, the
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Indemnitee shall also give notice of such amount to the Indemnitor at such time
as the amount of the claim is reasonably ascertainable. Each Indemnitor to whom
a Claim Notice is given shall respond to any Indemnitee that has given a Claim
Notice (a "Claim Response") within 30 days (the "Response Period") after the
date that the Claim Notice is received by Indemnitor. Any Claim Response shall
specify whether or not the Indemnitor given the Claim Response disputes the
claim described in the Claim Notice in whole or in part. If any Indemnitor
fails to give a Claim Response within the Response Period, such Indemnitor shall
be deemed not to dispute the claim described in the related Claim Notice. If
any Indemnitor elects not to dispute a claim described in a Claim Notice,
whether by failing to give a timely Claim Response or otherwise, then such claim
shall be conclusively deemed to be an obligation of such Indemnitor. If any
Indemnitor shall be obligated to indemnify an Indemnitee hereunder, such
Indemnitor shall pay to such Indemnitee within 30 days after the last day of the
applicable Response Period (or at such later time as the amount is
ascertainable) the amount to which such Indemnitee shall be entitled. If there
shall be a dispute as to the amount or manner of indemnification under this
Agreement, the Indemnitor and the Indemnitee shall seek to resolve such dispute
through negotiations and, if such dispute is not resolved within 20 days, the
Indemnitee may pursue whatever legal remedies may be available for the recovery
of the Damages claimed from any Indemnitor. If any Indemnitor fails to pay all
or any part of any indemnification obligation on or before the later to occur of
(x) 30 days after the last day of the applicable Response Period, and (y) if the
Claim Notice relates to Damages that have not been liquidated as of the date of
the Claim Notice, the date on which all or any part of such Damages shall have
become liquidated and determined, then the Indemnitor shall also be obligated to
pay to the Indemnitee interest on the unpaid amount for each day during which
the obligation remains unpaid at an annual rate of ten percent.
(b) The Indemnitee shall provide to the Indemnitor on request all
information and documentation reasonably necessary to support and verify any
Damages that the Indemnitee believes give rise to the claim for indemnification
hereunder and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee that
would have bearing on such claim.
(c) Except as hereinafter provided, in the case of third party claims
for which indemnification is sought, the Indemnitor shall have the option:
(x) to conduct any proceedings or negotiations in connection therewith, (y) to
take all other steps to settle or defend any such claim (provided that the
Indemnitor shall not settle any such claim without the consent of the Indemnitee
(which consent shall not be unreasonably withheld, it being understood that it
shall not be unreasonable for the Indemnitee to withhold its consent from any
settlement which (1) commits the Indemnitee to take, or to forbear to take, any
action, or (2) does not provide for a complete release of the Indemnitee by such
third party)), and (z) to employ counsel to contest any such claim or liability
in the name of the Indemnitee or otherwise. In any event, the Indemnitee shall
be entitled to participate at its own expense and by its own counsel (a
"Voluntary Participation") in any proceedings relating to any third party claim.
The Indemnitor shall, within 45 days of receipt of the Claim Notice, notify the
Indemnitee of its intention to assume the defense of the claim (a "Defense
Notice"). Until the Indemnitee has received the Defense Notice, the Indemnitee
shall take reasonable steps to defend (but may not settle) the claim. If the
Indemnitor declines to assume the defense of any such claim or fails to give a
Defense Notice within 45 days after receipt of the Claim Notice, the Indemnitee
shall defend
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against the claim but shall not settle such claim without the consent of the
Indemnitor (which consent shall not be unreasonably withheld). The expenses of
all proceedings, contests or lawsuits (other than those incurred in a Voluntary
Participation) with respect to claims as to which a party is entitled to
indemnification under this Article VII shall represent indemnifiable Damages
under this Agreement. Regardless of which party shall assume the defense of the
claim, the parties shall cooperate fully with one another in connection
therewith. Notwithstanding the foregoing, the Indemnitor shall not be entitled
(except with the consent of the Indemnitee) to take any of the actions referred
to in clauses (x), (y) or (z) of the first sentence of this subparagraph
unless: (a) the third party claim involves principally monetary damages; and
(b) the Indemnitor shall have expressly agreed in writing that, as between the
Indemnitor and the Indemnitee, the Indemnitor shall be solely obligated to
satisfy and discharge such third party claim. Damages payable hereunder shall
be appropriately adjusted to reflect the receipt of insurance proceeds, tax
benefits and detriments and proceeds received with respect to condemnation,
expropriation or eminent domain proceedings.
ARTICLE VIII
MISCELLANEOUS
8.1. Nonsurvival of Representations. The representations and warranties
of Buyer and Seller contained in this Agreement shall terminate upon the
Closing. The covenants and agreements of Buyer and Seller contained in this
Agreement shall survive the Closing.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) three Business Days
after mailing if mailed by certified or registered mail, return receipt
requested, (ii) one Business Day after delivery to Federal Express or other
nationally recognized overnight express carrier, if sent for overnight delivery
with fee prepaid, (iii) upon receipt if sent via facsimile with receipt
confirmed, or (iv) upon receipt if delivered personally, addressed as follows or
to such other address or addresses of which the respective party shall have
notified the other:
If to Seller, to:
National Semiconductor Corporation
2900 Semiconductor Drive
Santa Clara, CA 95052
Attention: General Counsel
Fax No.: (408) 733-0293
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With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer
Fax No.: (212) 403-2000
If to Buyer, to:
Fairchild Semiconductor Corporation
333 Western Avenue
Portland, ME 04106
Attention: General Counsel, mail stop 01-00
Fax No.: (207) 761-6020
With copies to:
Citicorp Venture Capital Ltd.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Richard M. Cashin, Jr.
Fax No.: 212-888-2940
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attn: G. Daniel O'Donnell
Fax No.: 215-994-2222
8.3. Expenses. Except as otherwise provided in this Agreement and in the
Recap Agreement, each party to this Agreement will bear all the fees, costs and
expenses which are incurred by it in connection with the transactions
contemplated hereby, whether or not such transactions are consummated, provided
that Seller and Buyer shall bear equally all Taxes (other than income Taxes) and
related charges, all fees for any necessary consents or approvals of any
Governmental Authority, and all recording and filing fees, in each case that may
be imposed by reason of the sale, transfer, assignment or delivery of the
Purchased Assets.
8.4. Entire Agreement. The agreement of the parties, which is comprised of
this Agreement and the Schedules hereto and the documents referred to herein,
sets forth the entire agreement and understanding between the parties and
supersedes any prior agreement or understanding, written or oral, relating to
the subject matter of this Agreement.
8.5. Assignment; Binding Effect; Severability. This Agreement may not be
assigned by any party hereto without the written consent of the other party,
provided, however that Buyer may assign its rights hereunder as collateral
security to any bona fide financial institution which
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is engaged in financing in the ordinary course providing financing to consummate
the transactions contemplated hereby or any financial institution which is
engaged in financing in the ordinary course through whom such financing is
refunded, replaced, or refinanced and any of the foregoing financial
institutions may, in enforcing its rights in connection with such financing,
assign Buyer's rights or cause Buyer to assign its rights hereunder in
connection with a sale of Buyer or its parent or the business in the form then
being conducted by Buyer substantially as an entirety; and provided, further,
Buyer may assign its rights hereunder, in whole or in part, but subject to all
limitations contained herein, to one or more subsidiaries of Buyer, provided
that, in any such case, Buyer gives Seller prior written notice of such
assignment. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors, legal representatives and permitted
assigns of each party hereto. The provisions of this Agreement are severable,
and in the event that any one or more provisions are deemed illegal or
unenforceable the remaining provisions shall remain in full force and effect
unless the deletion of such provision shall cause this Agreement to become
materially adverse to any party, in which event the parties shall use Best
Efforts to arrive at an accommodation which best preserves for the parties the
benefits and obligations of the offending provision.
8.6. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws (as opposed to the conflicts of
laws provisions) of the State of New York.
8.7. Execution in Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if the signatures thereto were
upon one instrument.
8.8. Public Announcement. Neither Seller nor Buyer shall, without the
approval of the other party hereto, make any press release or other public
announcement concerning the terms of the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be so obligated
by law, in which case such party shall use its Best Efforts to advise the other
party thereof and the parties shall use their Best Efforts to cause a mutually
agreeable release or announcement to be issued; provided that the foregoing
shall not preclude communications or disclosures necessary to (a) implement the
provisions of this Agreement (including the Financing) or (b) comply with
accounting, securities laws and Securities and Exchange Commission disclosure
obligations.
8.9. No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall (i) confer on any Person other than the parties
hereto and their respective successors or permitted assigns any rights
(including third party beneficiary rights), remedies, obligations or liabilities
under or by reason of this Agreement, or (ii) constitute the parties hereto as
partners or as participants in a joint venture. This Agreement shall not
provide third parties with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to the terms
of this Agreement.
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8.10. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
8.11. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
8.12. Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be duly executed on its behalf by its duly authorized officer as of the day
and year first written above.
NATIONAL SEMICONDUCTOR CORPORATION
By:___________________________________________
Donald Macleod
Executive Vice President and
Chief Financial Officer
FAIRCHILD SEMICONDUCTOR CORPORATION
By:___________________________________________
Joseph R. Martin
Executive Vice President and
Chief Financial Officer
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